Second-mover advantage and price leadership in Bertrand oligopoly
(2004)
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- Abstract
- 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 assumptions. We show that a firmwith 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. This yields sequential play with the low-cost firm as leader as the unique equilibrium outcome.
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Citations
Amir, R., & Stepanova, A. (2004). Second-mover advantage and price leadership in Bertrand oligopoly (ECON Discussion Papers 2004/68). https://hdl.handle.net/2078.5/128769