TY - JOUR
T1 - Sequential versus simultaneous choice with endogenous quality
AU - Aoki, Reiko
AU - Prusa, Thomas J.
N1 - Funding Information:
We gratefully acknowledge the financial support of the Japan Foundation Center for Global Partnership and the Suntory Foundation. Aoki thanks the Institute for Social and Economic Research at Osaka University, where preliminary work on this paper was done, for their hospitality. We would like to thank John Hillas, Hajime Myazaki, two anonymous referees, and Joe Harrington as editor for helpful suggestions.
PY - 1997/2
Y1 - 1997/2
N2 - 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.
AB - 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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U2 - 10.1016/0167-7187(95)00516-1
DO - 10.1016/0167-7187(95)00516-1
M3 - Article
AN - SCOPUS:0031542790
SN - 0167-7187
VL - 15
SP - 103
EP - 121
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
IS - 1
ER -