Endogenous Timing in Quality Investments and Price Competition
We modify the price-setting version of the vertically differentiated duopoly model by Aoki (2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Our results show that there are multiple equilibria in pure strategies, in which firms always select sequential play at the quality stage. We also investigate the mixed-strategy equilibrium, revealing that the probability of generating outcomes out of equilibrium is higher than its complement to one. In the alternative of full market coverage, we show that the quality stage is solved in dominant strategies and therefore the choice of roles becomes irrelevant as the Nash and Stackelberg solutions coincide.
|Date of creation:||Mar 2012|
|Contact details of provider:|| Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna|
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hamilton, Jonathan H. & Slutsky, Steven M., 1990.
"Endogenous timing in duopoly games: Stackelberg or cournot equilibria,"
Games and Economic Behavior,
Elsevier, vol. 2(1), pages 29-46, March.
- Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
- d'Aspremont, C. & Gerard-Varet, L. -A., 1980. "Stackelberg-solvable games and pre-play communication," Journal of Economic Theory, Elsevier, vol. 23(2), pages 201-217, October.
- d'ASPREMONT, C. & GERARD-VARET, L.-A., "undated". "Stackelberg-solvable games and pre-play communication," CORE Discussion Papers RP 425, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Lambertini, Luca & Tampieri, Alessandro, 2012. "Low-quality leadership in a vertically differentiated duopoly with Cournot competition," Economics Letters, Elsevier, vol. 115(3), pages 396-398.
- L. Lambertini & A. Tampieri, 2011. "Low-Quality Leadership in a Vertically Differentiated Duopoly with Cournot Competition," Working Papers wp750, Dipartimento Scienze Economiche, Universita' di Bologna.
- Reiko Aoki, 2003. "Effect of credible quality investment with Bertrand and Cournot competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 653-672, 03.
- Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:wp815. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dipartimento Scienze Economiche, Universita' di Bologna)
If references are entirely missing, you can add them using this form.