A Note on Endogenous Heterogeneity in a Duopoly

This note extends the simultaneous-move endogenous technology choice model of Mills and Smith (1996) in two directions. First, expanding consideration to when the technology set is sufficiently convex, we find that the likelihood for asymmetric equilibrium in technology choice does not expand under simultaneous moves. Second, introducing sequential moves in the technology choice stage, we find that (i) if the technology set is insufficiently convex then the same amount of asymmetry is obtained as under simultaneous moves, (ii) if the technology set is sufficiently convex then sequential moves lead to more asymmetric technology choices, and (iii) the first mover always chooses a more efficient technology in any asymmetric equilibrium.