Quantity And Price Competitions Under Endogenous Timing

As classical models in industrial economics, Cournot, Bertrand and Stackelberg models all assume that the order of moves is decided exogenously, an assumption has been criticized until now. The issue of endogenous timing forms the focus point of game theory ever since Hamilton and Slutsky insist that the order of moves in a game should be completely endogenous and construct two ways of endogenizing the order of moves in duopoly games. The present paper contributes to this growing trend by studying quantity and price competitions under endogenous timing. The main work can be summarized as follows:Firstly, quantity and price competition equilibrium under endogenous timing are compared and it is indicated that although the equilibrium move-order is simultaneous-move in quantity competition but sequential-moves in price competition, price competition is more competitive according to the following criteria: lower mark-up/output ratios, larger average output and lower average price.Secondly, the essential conditions yielding respectively the simultaneous and sequential modes of play under endogenous timing are analyzed in a general duopoly game. These conditions depend only on the monotonic character of the reaction functions and the payoff functions to the rival's strategic variable and the conclusions hold true not only in general quantity and price competition but also in other two player game such as contest game.Thirdly, the dissertation analyzes the equilibrium outcome of a linear duopoly under double endogenous choices, that is the strategic variables and the move-timing all can be chosen endogenously. It is showed the equilibrium outcomes are identical whether the strategic variables are chosen before or after the move-timing. The equilibrium outcomes are quantity competitions with three kinds of move modes, i.e. one simultaneous play and two sequential plays with both leader-follower configurations.Fourthly, the equilibrium of a dynamic multistage game which includes both R&D and product market competitions of the players is studied under endogenous R&D timing. It is showed that simultaneous and sequential R&D with either firm as leader can all emerge as equilibrium outcomes, depending on the spillover rates and the demand cross-slope, but not on the R&D cost functions. The equilibrium R&D level , quantity (price) of each firm and the total social welfare are all higher (lower) with sequential R&D. Compared to Cournot competition when there is Bertrand competition in the product market stage simultaneous-move in R&D stage can emerge more possible as an equilibrium outcomes. When the endogenous equilibrium R&D order is simultaneous-move Cournot competition in the product market stage can induce higher R&D level, but it is still lower than the social optimal R&D level.Finally, the endogenous equilibrium order of moves is analyzed in a price competition duopoly with incomplete information, where one firm is informed of the state of the demand while the other is uninformed. Only Stackelberg games with either the informed or the uninformed firm as leader emerge as equilibrium. In the Stackelberg equilibrium with the informed firm as leader signaling makes the leader's private information perfectly revealed and there is no price distortion to both firms, i.e. the equilibrium price of the informed (unformed) firm is the price of the Stackelberg leader (follower) with complete information.