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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226, Dipartimento Scienze Economiche, Universita' di Bologna.
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- CREMER, Helmuth & THISSE, Jacques-François, .
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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.
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"Better Late Than Early: Vertical Differentiation in the Adoption of a New Technology,"
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- GABSZEWICZ, Jean J. & THISSE, Jacques-François, .
"Entry (and exit) in a differentiated industry,"
CORE Discussion Papers RP
400, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
- Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
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