nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒03‒14
one paper chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Endogenous Timing in Quality Investments and Price Competition By L. Lambertini; A. Tampieri

  1. By: L. Lambertini; A. Tampieri
    Abstract: We modify the price-setting version of the vertically differentiated duopoly model by Aoki (2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Our results show that there are multiple equilibria in pure strategies, in which firms always select sequential play at the quality stage. We also investigate the mixed-strategy equilibrium, revealing that the probability of generating outcomes out of equilibrium is higher than its complement to one. In the alternative of full market coverage, we show that the quality stage is solved in dominant strategies and therefore the choice of roles becomes irrelevant as the Nash and Stackelberg solutions coincide.
    JEL: C73 L13
    Date: 2012–03
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:wp815&r=ind

This nep-ind issue is ©2012 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.