The School of Economics invites you to an Economic Theory seminar by Vladimir Smirnov (University of Sydney).

Preemption with a Second-Mover Advantage

Co-authors: 

Andrew Wait (The University of Sydney)

Abstract

We examine innovation in a market-entry timing game with complete information and observable actions when there is a second-mover advantage. Allowing for heterogenous payoffs between players, and for both leader’s and follower’s payoff functions to be multi-peaked and non-monotonic, we find that there are at most two pure-strategy subgame perfect equilibria. Sometimes these resemble familiar second-mover advantage equilibria from the literature. However, we show that despite there being a follower advantage at all times, there can be a pre-emption equilibrium with inefficient early entry. In fact, immediate entry is possible in a continuous analogue of the centipede game. These results are related to the observed premature entry and product launches in various markets.