First versus Second-Mover Advantage with Information Asymmetry about the Size of New Markets

Eric Rasmusen () and Young-Ro Yoon ()

No 2008-15, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: Is it better to move first, or second— to innovate, or to imitate? We look at this in a context with both asymmetric information and payoff externalities. Suppose two players, one with superior information about market quality, consider entering one of two new markets immediately or waiting until the last possible date. We show that the more accurate the informed player’s information, the more he wants to delay to keep his information private. The less-informed player also wants to delay, but in order to learn. The less accurate the informed player’s information, the more both players want to move first to foreclose a market. More accurate information can lead to inefficiency by increasing the players’ incentive to delay. Thus, a moderate delay cost can increase industry profits.

Keywords: market entry; first- and second mover advantage; payoff externalities; informational externalities; endogenous timing (search for similar items in EconPapers)
JEL-codes: D81 D82 L13 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-com, nep-cta and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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