Firms timing of production with heterogeneous consumers

I revisit endogenous timing in a quantity-setting duopoly game. In the basic model, I show that given strong heterogeneity in consumers willingness to pay ( WTP ) and a moderately small consumer segment with low WTP , sequential moving outcomes can appear in equilibrium with the follower enjoying second-mover advantage. Owing to consumer heterogeneity in WTP , there is a local property that a firm's aggressive behaviour may lead to a competitor responding more aggressively. Hence, the sequential moves can restrict firms total outputs to avoid a price collapse, and result in firms strategic choices that Pareto dominate those under the simultaneous move. I further generalize my results and show that although firms compete in quantity, under some conditions of the demand function, features of strategic complements can appear.