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Second-Mover Advantage and Price Leadership in Bertrand Duopoly

Author

Listed:
  • Rabah Amir

    (University of Southern Denmark, Odense)

  • Anna Stepanova

    (University of Southern Denmark, Odense)

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.

Suggested Citation

  • Rabah Amir & Anna Stepanova, 2000. "Second-Mover Advantage and Price Leadership in Bertrand Duopoly," CIE Discussion Papers 2000-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    • Handle: RePEc:kud:kuieci:2000-10
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    More about this item

    Keywords

    price competition; endogenous timing; second-mover advantage; risk dominance;
    All these keywords.

    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

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