Abstract
The model considers a two-period duopoly game where in the first period the
leader produces a good with a given quality and the other firm can only imitate it. It is the
Stackelberg case where, in addition, the leader has the choice of the quality of the good and
the imitation is costly, but not prohibitively so. Under this assumption quantities and profits
in terms of the quality are derived as subgame perfect equilibrium. In the second period
there exists the possibility for the leader and/or the follower to make an investment. The
outcome of this is uncertain: it could either be the case that a good of better quality can be
introduced, or that a cost-reduction in producing the existing good is attained. The former
case is a product innovation, whereas the latter case is a process innovation. By solving the
game backwards as a function of the quality of the first period, there exists the possibility
of an equilibrium where the follower chooses to invest and the leader does not invest.
Lingua originale | Inglese |
---|---|
pagine (da-a) | 245-256 |
Numero di pagine | 12 |
Rivista | International Journal of the Economics of Business |
Volume | 6 |
Stato di pubblicazione | Pubblicato - 1999 |
Pubblicato esternamente | Sì |
Keywords
- leapfrogging
- product differentiation