Discussion Paper
Abstract
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.
Comments and Questions
The authors fail to make clear why their results are important. They could have paid somewhat more attention to the math.
Dear Redaer,
Thank you so much for your comments. Please find attached my answer in a pdf file.
Best wishes,
Alessandro
see attached file
Dear Referee,
Thank you very much for your comments. Please find attached the pdf file with my answer.
Best wishes,
Alessandro
Please find the file attached
See attached file
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 ...[more]
... coverage and corner solution in the price stage.
Best wishes,
Alessandro