Customization in an Endogenous-Timing Game with Vertical Differentiation

Oksana Loginova () and X. Wang ()
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Oksana Loginova: Department of Economics, University of Missouri, https://economics.missouri.edu/people/loginova

No 1008, Working Papers from Department of Economics, University of Missouri

Abstract: We study customization in a duopoly game in which the firms' products have different qualities. Whether customization choices are made simultaneously or sequentially is endogenously determined. Specifically, the customization stage of the game involves two periods. Each firm either selects its product type in period 1 or postpones this decision to period 2. We show that both quality and endogenous timing play important roles in determining the equilibrium outcome. Customization occurs only if the quality difference is sufficiently large. Endogeneity of timing in the customization stage sometimes enables the firms to achieve an outcome that is Pareto superior to that if they were to make their customization choices simultaneously. Although the higher quality firm is more likely to customize, in some circumstances endogenous timing allows the lower quality firm to obtain an advantage that it would not have under simultaneous customization choices.

Keywords: customization; horizontal differentiation; vertical differentiation; endogenous timing (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Pages: 20
Date: 2010-07-02
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (1)

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Working Paper: Customization in an Endogenous-Timing Game with Vertical Differentiation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1008

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