Premium
WOULD YOU LIKE TO ENTER FIRST WITH A LOW‐QUALITY GOOD?
Author(s) -
Lambertini Luca,
Tedeschi Piero
Publication year - 2007
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.0307-3378.2007.00262.x
Subject(s) - subgame perfect equilibrium , duopoly , economics , microeconomics , quality (philosophy) , sequence (biology) , mathematical economics , nash equilibrium , cournot competition , chemistry , biochemistry , philosophy , epistemology
Using a two‐period duopoly model with vertical differentiation, we show that there exists a unique subgame perfect equilibrium where the first entrant supplies a lower quality and gains higher profits than the second entrant. We also prove that this entry sequence is socially efficient.