Discussion Paper
No. 2013-37 | July 17, 2013
Luca Lambertini and Alessandro Tampieri
Endogenous Timing in Quality Choices and Price Competition


The authors modify the price-setting version of the vertically differentiated duopoly model by Aoki (Effect of Credible Quality Investment with Bertrand and Cournot Competition, 2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Their results show that there are multiple equilibria in pure strategies, whereby firms always select sequential play at the quality stage. They also investigate the mixed-strategy equilibrium, revealing that the probability of generating out-of-equilibrium outcomes is higher than its complement to one. In the alternative case with full market coverage, the authors 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 Classification:

C72, L13

Cite As

Luca Lambertini and Alessandro Tampieri (2013). Endogenous Timing in Quality Choices and Price Competition. Economics Discussion Papers, No 2013-37, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2013-37

Comments and Questions

Anonymous - Some comments and typos
July 29, 2013 - 12:09
The authors fail to make clear why their results are important. They could have paid somewhat more attention to the math.

Alessandro Tampieri - Reply to Reader 1
August 06, 2013 - 09:27 | Author's Homepage
Dear Redaer, Thank you so much for your comments. Please find attached my answer in a pdf file. Best wishes, Alessandro

Anonymous - Referee Report 1
July 31, 2013 - 08:53
see attached file

Anonymous - Reply to Referee1
August 06, 2013 - 09:14 | Author's Homepage
Dear Referee, Thank you very much for your comments. Please find attached the pdf file with my answer. Best wishes, Alessandro

Alessandro Tampieri - Reply to Referee 1
August 06, 2013 - 09:40 | Author's Homepage
Please find the file attached

Anonymous - Referee Report 2
September 10, 2013 - 10:10
See attached file

Alessandro Tampieri - Reply to Referee 2
September 10, 2013 - 12:52
Dear Referee, Thank you so much for all your comments. We will take into consideration all your remarks in an updated version of the paper. Also, in order to have a more comprehensive analysis, we added a further section in which we show the results with full market coverage and corner solution in the price stage. Best wishes,Alessandro