IDEAS home Printed from https://ideas.repec.org/a/eee/gamebe/v55y2006i1p1-20.html
   My bibliography  Save this article

Second-mover advantage and price leadership in Bertrand duopoly

Author

Listed:
  • Amir, Rabah
  • Stepanova, Anna

Abstract

We consider the issues of endogenous timing and first versus second-mover advantage in differentiated-product Bertrand duopoly with asymmetric linear costs. First, we provide a thorough set of results in the cases where prices are either strategic substitutes and/or complements, dispensing with some common extraneous assumptions. Second, with linear demand for substitute goods, the scope for second-mover advantage crucially depends on the unit cost difference. A natural endogenous timing scheme coupled with equilibrium selection according to risk-dominance yields a unique outcome with the low-cost firm as leader.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Amir, Rabah & Stepanova, Anna, 2006. "Second-mover advantage and price leadership in Bertrand duopoly," Games and Economic Behavior, Elsevier, vol. 55(1), pages 1-20, April.
    • Handle: RePEc:eee:gamebe:v:55:y:2006:i:1:p:1-20
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0899-8256(05)00035-7
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
    2. Mailath George J., 1993. "Endogenous Sequencing of Firm Decisions," Journal of Economic Theory, Elsevier, vol. 59(1), pages 169-182, February.
    3. Boyer, Marcel & Moreaux, Michel, 1987. "Being a leader or a follower: Reflections on the distribution of roles in duopoly," International Journal of Industrial Organization, Elsevier, vol. 5(2), pages 175-192.
    4. van Damme, Eric & Hurkens, Sjaak, 1996. "Commitment Robust Equilibria and Endogenous Timing," Games and Economic Behavior, Elsevier, vol. 15(2), pages 290-311, August.
    5. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-248, March.
    6. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-653, October.
    7. Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-233, March.
    8. van Damme, Eric & Hurkens, Sjaak, 2004. "Endogenous price leadership," Games and Economic Behavior, Elsevier, vol. 47(2), pages 404-420, May.
    9. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    10. d'Aspremont, C. & Gerard-Varet, L. -A., 1980. "Stackelberg-solvable games and pre-play communication," Journal of Economic Theory, Elsevier, vol. 23(2), pages 201-217, October.
    11. Cabrales, Antonio & Garcia-Fontes, Walter & Motta, Massimo, 2000. "Risk dominance selects the leader: An experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 137-162, January.
    12. Daughety, Andrew F & Reinganum, Jennifer F, 1994. "Asymmetric Information Acquisition and Behavior in Role Choice Models: An Endogenously Generated Signaling Game," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 795-819, November.
    13. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    14. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    15. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, December.
    16. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    17. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    18. Amir, Rabah & Grilo, Isabel, 1999. "Stackelberg versus Cournot Equilibrium," Games and Economic Behavior, Elsevier, vol. 26(1), pages 1-21, January.
    19. von Stengel, Bernhard, 2010. "Follower payoffs in symmetric duopoly games," Games and Economic Behavior, Elsevier, vol. 69(2), pages 512-516, July.
    20. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer.
    21. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    22. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
    23. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
    24. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    25. Anderson, Simon P. & Engers, Maxim, 1992. "Stackelberg versus Cournot oligopoly equilibrium," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 127-135, March.
    26. Pastine, Ivan & Pastine, Tuvana, 2004. "Cost of delay and endogenous price leadership," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 135-145, January.
    27. Rosenthal, Robert W., 1991. "A note on robustness of equilibria with respect to commitment opportunities," Games and Economic Behavior, Elsevier, vol. 3(2), pages 237-243, May.
    28. Raymond J. Deneckere & Dan Kovenock, 1992. "Price Leadership," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 143-162.
      • Raymond Deneckere & Dan Kovenock, 1988. "Price Leadership," Discussion Papers 773, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    29. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-274, May.
    30. Daughety, Andrew F, 1990. "Beneficial Concentration," American Economic Review, American Economic Association, vol. 80(5), pages 1231-1237, December.
    31. Leininger, Wolfgang, 1993. "More Efficient Rent-Seeking--A Munchhausen Solution," Public Choice, Springer, vol. 75(1), pages 43-62, January.
    32. Joseph E. Stiglitz & G. Frank Mathewson (ed.), 1986. "New Developments in the Analysis of Market Structure," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262690934, December.
    33. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-1277, November.
    34. Rabah Amir & Isabel Grilo & Jim Jin, 1999. "Demand-Induced Endogenous Price Leadership," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 1(03n04), pages 219-240.
    35. Amir Rabah, 1995. "Endogenous Timing in Two-Player Games: A Counterexample," Games and Economic Behavior, Elsevier, vol. 9(2), pages 234-237, May.
    36. Donald M. Topkis, 1978. "Minimizing a Submodular Function on a Lattice," Operations Research, INFORMS, vol. 26(2), pages 305-321, April.
    37. Ivan Pastine & Tuvana Pastine, 2000. "On Endogenous Leadership in Price Competition," Working Papers 0009, Department of Economics, Bilkent University.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. van Damme, Eric & Hurkens, Sjaak, 2004. "Endogenous price leadership," Games and Economic Behavior, Elsevier, vol. 47(2), pages 404-420, May.
    2. Chen, Jing & Chen, Bintong & Li, Wei, 2018. "Who should be pricing leader in the presence of customer returns?," European Journal of Operational Research, Elsevier, vol. 265(2), pages 735-747.
    3. Niu, Baozhuang & Wang, Yulan & Guo, Pengfei, 2015. "Equilibrium pricing sequence in a co-opetitive supply chain with the ODM as a downstream rival of its OEM," Omega, Elsevier, vol. 57(PB), pages 249-270.
    4. von Stengel, Bernhard, 2010. "Follower payoffs in symmetric duopoly games," Games and Economic Behavior, Elsevier, vol. 69(2), pages 512-516, July.
    5. Hubert Kempf & Grégoire Rota Graziosi, 2010. "Leadership in Public Good Provision: A Timing Game Perspective," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(4), pages 763-787, August.
    6. Amir, Rabah & Grilo, Isabel, 1999. "Stackelberg versus Cournot Equilibrium," Games and Economic Behavior, Elsevier, vol. 26(1), pages 1-21, January.
    7. Kempf, Hubert & Rota-Graziosi, Grégoire, 2010. "Endogenizing leadership in tax competition," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 768-776, October.
    8. Magnus Hoffmann & Grégoire Rota‐Graziosi, 2020. "Endogenous timing in the presence of non‐monotonicities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 359-402, February.
    9. Hoffmann, Magnus & Rota-Graziosi, Grégoire, 2012. "Endogenous timing in general rent-seeking and conflict models," Games and Economic Behavior, Elsevier, vol. 75(1), pages 168-184.
    10. Matsui, Kenji, 2016. "Asymmetric product distribution between symmetric manufacturers using dual-channel supply chains," European Journal of Operational Research, Elsevier, vol. 248(2), pages 646-657.
    11. Marco Marini & Giorgio Rodano, 2012. "Sequential vs Collusive Payoffs in Symmetric Duopoly Games," DIAG Technical Reports 2012-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    12. Madden, Paul & Pezzino, Mario, 2019. "Endogenous price leadership with an essential input," Games and Economic Behavior, Elsevier, vol. 118(C), pages 47-59.
    13. Pastine, Tuvana & Pastine, Ivan, 2001. "Cost of Delay, Deadlines and Endogenous Price Leadership," CEPR Discussion Papers 3054, C.E.P.R. Discussion Papers.
    14. Attila Tasnádi, 2016. "Endogenous timing of moves in Bertrand–Edgeworth triopolies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 12(4), pages 317-334, December.
    15. Capuano, Carlo & De Feo, Giuseppe, 2009. "On Public Inefficiencies in a Mixed Duopoly," SIRE Discussion Papers 2009-35, Scottish Institute for Research in Economics (SIRE).
    16. Marco Marini & Giorgio Rodano, 2011. "Lead, Follow or Cooperate? Endogenous Timing & Cooperation in Symmetric Duopoly Games," Working Papers 1112, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
    17. Scott M. Gilpatric & Youping Li, 2016. "Endogenous Price Leadership and the Strategic Acquisition of Information," Southern Economic Journal, John Wiley & Sons, vol. 82(3), pages 859-873, January.
    18. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    19. Pastine, Ivan & Pastine, Tuvana, 2004. "Cost of delay and endogenous price leadership," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 135-145, January.
    20. Arozamena, Leandro & Weinschelbaum, Federico, 2009. "Simultaneous vs. sequential price competition with incomplete information," Economics Letters, Elsevier, vol. 104(1), pages 23-26, July.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:gamebe:v:55:y:2006:i:1:p:1-20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622836 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.