Second‐Mover Advantages in Dynamic Quality Competition

Heidrun Hoppe-Wewetzer and Ulrich Lehmann‐Grube

Journal of Economics & Management Strategy, 2001, vol. 10, issue 3, 419-433

Abstract: This paper explores a dynamic model of product innovation, extending the work of Dutta, Lach, and Rustichini (1995). It is shown that if R&D costs for quality improvements are low, the dynamic competition is structured as a race for being the pioneer firm with payoff equalization in equilibrium, but switches to a waiting game with a second‐mover advantage in equilibrium if R&D costs are high. Moreover, the second‐mover advantage increases monotonically as R&D becomes more costly.

Date: 2001
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https://doi.org/10.1111/j.1430-9134.2001.00419.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:10:y:2001:i:3:p:419-433

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