Second-mover advantage and price leadership in Bertrand duopoly

Rabah AMIR and Anna Stepanova

No 2004037, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider the issue of first versus second-mover advantage in differentiated-product Bertrand duopoly with general demand and asymmetric linear costs. We generalize existing results for all possible combinations where prices are either strategic substitutes and/or complements, dispensing with common extraneous assumptions. We show that a firmwith a sufficiently large cost lead over its rival has a first mover advantage. For the linear version of the model, we invoke a naturalendogenous timing scheme coupled with equilibrium selection according to risk-dominance. This yields sequential play with the low-cost firm as leader as the unique equilibrium outcome.

Keywords: price competition; endogenous timing; Þrst/second-mover advantage; risk dominance (search for similar items in EconPapers)
JEL-codes: L13 C72 D43 (search for similar items in EconPapers)
Date: 2004-06-01
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Related works:
Working Paper: Second-Mover Advantage and Price Leadership in Bertrand Duopoly (2000)
Journal Article: Second-mover advantage and price leadership in Bertrand duopoly (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:cor:louvco:2004037

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