Second-mover advantage and price leadership in Bertrand duopoly

Amir, Rabah and Stepanova, Anna (2006) Second-mover advantage and price leadership in Bertrand duopoly. Games and Economic Behavior, 55 (1). pp. 1-20. ISSN 0899-8256. (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided)

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We consider the issue of first- versus second-mover advantage in differentiated-product Bertrand duopoly with general demand and asymmetric linear costs. We generalize existing results for all possible combinations where prices are either strategic substitutes and/or complements, dispensing with common extraneous and restrictive assumptions. We show that a firm with a sufficiently large cost lead over its rival has a first-mover advantage. For the linear version of the model, we invoke a natural endogenous timing scheme coupled with equilibrium selection according to risk dominance. The analysis yields, as the unique equilibrium outcome, sequential play with the low-cost firm as leader.

Item Type: Article
Uncontrolled keywords: price competition; endogenous timing; first/second-mover advantage; risk dominance
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Anna Stepanova
Date Deposited: 11 Jun 2008 17:33
Last Modified: 13 Jul 2011 13:02
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