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Sequential vs. Simultaneous Choice With Endogenous Quality

  • Thomas J. Prusa


    (Rutgers University)

  • Reiko Aoki


    (SUNY-Stony Brook)

In this paper we examine how the timing of investment affects the levels of quality chosen by firms. We show that in a model with vertical quality differentiation a game with sequential quality choice induces both firms to make smaller quality investments than they would in a game with simultaneous quality choice. Furthermore, we show that while aggregate profit is higher, both consumer and social surplus are lower under sequential quality choice.

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Paper provided by Rutgers University, Department of Economics in its series Departmental Working Papers with number 199510.

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Date of creation: 09 Mar 1997
Date of revision:
Handle: RePEc:rut:rutres:199510
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