Would you like to enter first with a low-quality good?
Using a two-period duopoly model with vertical differentiation, we show that there exists a unique subgame perfect equilibrium where the first entrant supplies a lower quality and gains higher profits than the second entrant. We also prove that this entry sequence is socially efficient.
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"Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 4(4), pages 563-89, Winter.
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- Luca LAMBERTINI, 1997.
"The multiproduct monopolist under vertical differentiation : An inductive approach,"
Discussion Papers (REL - Recherches Economiques de Louvain)
1997021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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191, Dipartimento Scienze Economiche, Universita' di Bologna.
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- CREMER,Â Helmuth & THISSE,Â Jacques-FranÃ§ois, .
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CORE Discussion Papers RP
931, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Thisse, Jacques-Francois, 1991. "Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 383-90, June.
- GABSZEWICZ, Jean J. & THISSE, Jacques-FranÃ§ois, .
"Entry (and exit) in a differentiated industry,"
CORE Discussion Papers RP
400, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Ulrich Lehmann-Grube, 1997. "Strategic Choice of Quality When Quality is Costly: The Persistence of the High-Quality Advantage," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 372-384, Summer.
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
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- Heidrun C. Hoppe & Ulrich Lehmann-Grube, 2001. "Second-Mover Advantages in Dynamic Quality Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(3), pages 419-433, 09.
- Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
- Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
- A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
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