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Strategic introduction of a new product under uncertainty: A duopoly case

Diana Terrazas‐Santamaria
Authors registered in the RePEc Author Service: Diana Terrazas-Santamaría

Managerial and Decision Economics, 2021, vol. 42, issue 4, 796-807

Abstract: We present a continuous‐game of two symmetric firms competing strategically to launch a new product, simultaneously or sequentially. In the timing game, where each firm decides when to launch, we consider the uncertainty of profits and that the launch is successful with a probability that can be less than one. We find that when the first‐mover advantage (FMA) is large, even with a low probability of success, one firm preempts the other deteriorating the leader's value function. The simultaneous investment dominates the sequential one when the FMA is small or when the probability is almost zero.

Date: 2021
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