 Endogenous location leadershipSergio Meza and Mihkel Tombak International Journal of Industrial Organization, 2009, vol. 27, issue 6, 687-707 Abstract: We analyze a game of timing where Sellers, which have marginal production cost asymmetries, can delay entry and a commitment to a location in a Hotelling type setting. When cost differences are large enough the game becomes a war of attrition that yields Stackelberg behavior where the high cost firm will delay choosing a location until the low cost firm commits to its position. We find interaction effects between timing and the degree of product differentiation and compute timing/location and mixed strategy equilibria through a range of marginal cost differences. The firms maximally differentiate with moderate cost differences; with somewhat greater cost differences there is intermediate differentiation, and; with large cost differences there is a blockading monopoly. The low cost firm always commits to entry immediately whereas the high cost firm either enters immediately, shortly after the low cost leader, or never, depending on the cost differences. Finally, we find that in equilibrium the duopoly is sustained for a larger range of cost differentials and that differentiation is greater than the social optimum. Keywords: Asymmetries; Horizontal; differentiation; Stackelberg; Games; of; timing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:27:y:2009:i:6:p:687-707 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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