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A Note on Endogenous Heterogeneity in a Duopoly

Author

Listed:
  • X. Henry Wang

    (Department of Economics, University of Missouri-Columbia)

  • Chenhang Zeng

    (Research Center for Games and Economic Behavior, Shandong University)

Abstract
This note extends the simultaneous-move endogenous technology choice model of Mills and Smith (1996) in two directions. First, expanding consideration to when the technology set is sufficiently convex, we find that the likelihood for asymmetric equilibrium in technology choice does not expand under simultaneous moves. Second, introducing sequential moves in the technology choice stage, we find that (i) if the technology set is insufficiently convex then the same amount of asymmetry is obtained as under simultaneous moves, (ii) if the technology set is sufficiently convex then sequential moves lead to more asymmetric technology choices, and (iii) the first mover always chooses a more efficient technology in any asymmetric equilibrium.

Suggested Citation

  • X. Henry Wang & Chenhang Zeng, 2014. "A Note on Endogenous Heterogeneity in a Duopoly," SDU Working Papers 2015-02, School of Economics, Shandong University.
    • Handle: RePEc:shn:wpaper:2015-02
    as

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    File URL: http://econ.sdu.edu.cn/RePEc/shn/wpaper/A_Note_on_Endogenous_Heterogeneity_in_a_Duopoly.pdf
    File Function: First version, 2014
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    References listed on IDEAS

    as
    1. Joshua S. Gans & David H. Hsu & Scott Stern, 2002. "When Does Start-Up Innovation Spur the Gale of Creative Destruction?," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 571-586, Winter.
    2. Pal, Rupayan, 2010. "Technology adoption in a differentiated duopoly: Cournot versus Bertrand," Research in Economics, Elsevier, vol. 64(2), pages 128-136, June.
    3. Mills, David E. & Smith, William, 1996. "It pays to be different: Endogenous heterogeneity of firms in an oligopoly," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 317-329, May.
    4. Yanfang Zhang & Shue Mei & Weijun Zhong, 2014. "New technology adoption in a Cournot oligopoly with spillovers," Journal of Economics, Springer, vol. 112(2), pages 115-136, June.
    5. Elberfeld, Walter, 2003. "A note on technology choice, firm heterogeneity and welfare," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 593-605, April.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    technology choice; endogenous heterogeneity; duopoly.;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    NEP fields

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