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Second-Mover Advantage and Price Leadership in Bertrand Duopoly

  • Rabah Amir

    (University of Southern Denmark, Odense)

  • Anna Stepanova

    (University of Southern Denmark, Odense)

We consider the issues of endogenous timing and first versus second-mover advantage in differentiated-product Bertrand duopoly with asymmetric linear costs. First, we provide a thorough set of results in the cases where prices are either strategic substitutes and/or complements, dispensing with some common extraneous assumptions. Second, with linear demand for substitute goods, the scope for second-mover advantage crucially depends on the unit cost difference. A natural endogenous timing scheme coupled with equilibrium selection according to risk-dominance yields a unique outcome with the low-cost firm as leader.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2000-10.

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Length: 25 pages
Date of creation: Dec 2000
Handle: RePEc:kud:kuieci:2000-10
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