Sequential Entry in a Vertically Differentiated Duopoly

Lambertini, Luca ; Tedeschi, Piero (2003) Sequential Entry in a Vertically Differentiated Duopoly. DOI 10.6092/unibo/amsacta/608.

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Abstract

We analyse a model of vertical differentiation focusing on the trade-off between entering early and exploiting monopoly power with a low quality, versus waiting and enjoying a dominant market position with a superior product. We show that there exists a unique equilibrium where the leader enters with a lower quality than the follower, for low discount factors, for high costs of quality and for low consumers’ willingness to pay for quality.

Abstract

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Monografia (Working paper)

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