Discussion Paper

No. 2013-37 | July 17, 2013
Endogenous Timing in Quality Choices and Price Competition

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.

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

Assessment



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

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

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

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 ...[more]

... coverage and corner solution in the price stage.

Best wishes,
Alessandro