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Should Brand Firms Always Take Pioneering Position?

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  • Cong Pan

Abstract

This paper discusses brand firms' endogenous timing problem when facing nonbrand firms under quantity competition. We study a market comprising brand and nonbrand products. There exist heterogeneous consumer groups-one group buys only brand products while the other one cares little about the brand. These two consumer groups constitute the high- and low-end markets respectively. The brand firms' moving order is endogenized, whereas the nonbrand firms are restricted to move in a later period. We show that if the low-end market is of an intermediate size, the leader-follower equilibrium outcome occurs, and the follower obtains second mover advantage which diminishes when the number of nonbrand firms increases. These results follow from the fact that each brand firm's best response function has an upward jump if the rival's output exceeds a particular level. Thus, the leader's profit function has a downward jump at some particular point while the follower's profit does not.

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  • Cong Pan, 2015. "Should Brand Firms Always Take Pioneering Position?," ISER Discussion Paper 0938, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:0938
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2015/DP0938.pdf
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    References listed on IDEAS

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    1. 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.
    2. 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.
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    5. Sadanand, Asha & Sadanand, Venkatraman, 1996. "Firm Scale and the Endogenous Timing of Entry: a Choice between Commitment and Flexibility," Journal of Economic Theory, Elsevier, vol. 70(2), pages 516-530, August.
    6. Normann, Hans-Theo, 2002. "Endogenous Timing with Incomplete Information and with Observable Delay," Games and Economic Behavior, Elsevier, vol. 39(2), pages 282-291, May.
    7. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, vol. 36(8), pages 1601-1626, December.
    8. Glen L. Urban & Theresa Carter & Steven Gaskin & Zofia Mucha, 1986. "Market Share Rewards to Pioneering Brands: An Empirical Analysis and Strategic Implications," Management Science, INFORMS, vol. 32(6), pages 645-659, June.
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    Cited by:

    1. Cong Pan, 2018. "Firms’ timing of production with heterogeneous consumers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1339-1362, November.

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