First mover advantage by product proliferation in multiproduct duopoly

Yi‐Ling Cheng and Takatoshi Tabuchi

International Journal of Economic Theory, 2020, vol. 16, issue 1, 106-118

Abstract: This study aims to show that the product proliferation strategy in multi‐product duopoly is first‐mover advantage. We consider simultaneous and Stackelberg variety competitions. A firm producing more varieties charges a higher price, produces larger total quantities, and earns higher total revenue. When firms sequentially choose the masses of varieties and then simultaneously decide prices, the leader produces more varieties and enjoys first‐mover advantage. The masses of varieties can be regarded as strategic substitutes in the same way that quantities are. Finally, the market is likely to provide too few varieties relative to the social optimum.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:16:y:2020:i:1:p:106-118

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