Preemption with a Second-Mover Advantage

Vladimir Smirnov and Andrew Wait

No 2020-06, Working Papers from University of Sydney, School of Economics

Abstract: We examine innovation in a market-entry timing game with complete information and observable actions when there is a second-mover advantage. Allowing for heterogenous payoffs between players, and for both leader's and follower's payoff functions to be multi-peaked and non-monotonic, we find that there are at most two pure-strategy subgame perfect equilibria. Sometimes these resemble familiar second-mover advantage equilibria from the literature. However, we show that despite there being a follower advantage at all times, there can be a preemption equilibrium with inefficient early entry. In fact, immediate entry is possible in a continuous analogue of the centipede game. These results are related to the observed premature entry and product launches in various markets.

Keywords: timing games; second-mover advantage; preemption. (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
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Journal Article: Preemption with a second-mover advantage (2021)
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