Sequential vs. Simultaneous Choice With Endogenous Quality

Thomas Prusa and Reiko Aoki

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: In this paper we examine how the timing of investment affects the levels of quality chosen by firms. We show that in a model with vertical quality differentiation a game with sequential quality choice induces both firms to make smaller quality investments than they would in a game with simultaneous quality choice. Furthermore, we show that while aggregate profit is higher, both consumer and social surplus are lower under sequential quality choice.

Keywords: quality choice; sequential and simultaneous quality choice; timing of R&D investment; vertical quality differentiation (search for similar items in EconPapers)
JEL-codes: K00 O31 O34 (search for similar items in EconPapers)
Date: 1997-03-09
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:199510

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