Sequential vs. Simultaneous Choice With Endogenous Quality

In this paper we examine how the timing of investment affects the levels of quality chosen by firms. We show that in a model with vertical quality differentiation a game with sequential quality choice induces both firms to make smaller quality investments than they would in a game with simultaneous quality choice. Furthermore, we show that while aggregate profit is higher, both consumer and social surplus are lower under sequential quality choice.

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Year of publication:	1997-03-09
Authors:	Prusa, Thomas J. ; Aoki, Reiko
Institutions:	Department of Economics, Rutgers University-New Brunswick
Subject:	quality choice \| sequential and simultaneous quality choice \| timing of R&D investment \| vertical quality differentiation

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Series:	Departmental Working Papers.
Type of publication:	Book / Working Paper
Classification:	K00 - Law and Economics. General ; O31 - Innovation and Invention: Processes and Incentives ; O34 - Intellectual Property Rights: National and International Issues
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005800407