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Blocking in a timing game with asymmetric players

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  • Smirnov, Vladimir
  • Wait, Andrew

Abstract

We examine innovation as a market-entry timing game with complete information and observable actions. We allow for heterogenous payoffs between players, and for a leader's payoff functions to be multi-peaked and non-monotonic. Assuming that the follower's payoff is non-increasing with the time of the leader's entry, we characterize all pure-strategy subgame perfect equilibria for the two-player asymmetric model, showing that there are at most two equilibria. Firm heterogeneity allows for equilibria with different characteristics than previously examined in the literature. For example, a fi rm may wish to enter earlier blocking its rival's entry, so as to avoid an anticipated lower future payoff if it waited. A notable feature of this blocking equilibrium is that rents need not be equalized between the leader and follower. We also show that if the followers' payoffs are non-monotonic, the iterative incentives to block each other's product launch may lead to starkly inefficient early entry in a continuous version of the centipede game.

Suggested Citation

  • Smirnov, Vladimir & Wait, Andrew, 2018. "Blocking in a timing game with asymmetric players," Working Papers 2018-05, University of Sydney, School of Economics, revised May 2019.
  • Handle: RePEc:syd:wpaper:2018-05
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    File URL: http://econ-wpseries.com/2018/201805-2.pdf
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    References listed on IDEAS

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    Cited by:

    1. Smirnov, Vladimir & Wait, Andrew, 2020. "Preemption with a Second-Mover Advantage," Working Papers 2020-06, University of Sydney, School of Economics.

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    Keywords

    timing games; blocking entry; innovation.;

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