Sequential vs. Simultaneous Choice With Endogenous Quality
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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|Date of creation:||09 Mar 1997|
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