Timing of entry and location/product differentiation

2018 ◽  
Vol 14 (2) ◽  
pp. 179-200
Author(s):  
Chia-Hung Sun
Keyword(s):  
Product Differentiation ◽  
Timing Of Entry

Entry and exit in a vertically differentiated industry

2011 ◽  
Vol 61 (4) ◽  
pp. 413-440
Author(s):  
S. Esteve-Pérez
Keyword(s):  
Product Quality ◽  
Product Differentiation ◽  
Relative Strength ◽  
Demand Elasticity ◽  
Fixed Costs ◽  
Entry And Exit ◽  
Strategic Choices ◽  
Quality Costs ◽  
Duopoly Model ◽  
Timing Of Entry

This paper presents a duopoly model of firm rivalry in a vertically differentiated industry when market dynamics is explicitly accounted for. It shows how the interplay between demand (degree of product differentiation, demand elasticity) and cost (fixed and quality costs) factors determine firms’ relative strength when quality is irreversible. The main strategic choices are product quality, price and the timing of entry and exit. Further, firms incur sunk quality costs at time of entry and operating fixed costs of maintaining quality. Although the low quality firm may outlast its rival in the declining phase, both firms wish to be the “quality leader”.

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