A Competitive Duopoly where Information Spillovers can be Mutually Advantageous

This paper studies the production strategies of firms in a duopoly market of homogenous products characterized by quantity competition. Demand is partially unknown and firms are free to produce once, whenever they want before the existence of demand. We show that the nature of the equilibrium in such a game depends on the importance of the information spillovers between a leader and a follower. A Pareto-optimal sequential entry may happen. Therefore, the existence of information spillovers can be sufficient to bypass the leader’s rent dissipation result in a duopoly quantity competition framework.