The Korean Economic Review
First-Mover and Second-Mover Advantages in a Bilateral Duopoly
DongJoon Lee (Nagoya University of Commerce and Business), Kangsik Choi (Pusan National University) and Kyuchan Hwang (Tokai Gakuen University)Year 2017Vol. 33No. 1
Abstract
This study examines a first-mover and a second-mover advantage in a vertical structurein which each upstream firm trades with an exclusive retailer and downstream retailersmove sequentially. We provide two main claims. One is that, in Cournot (Bertrand)competition, the leader’s upstream firm sets the input price equal to its marginal cost (equalto its marginal cost), while the follower’s upstream firm sets the input price below itsmarginal cost (above its marginal cost). The other is that the follower’s (leader’s) upstreamfirm enjoys higher profits than the leader’s (follower’s) upstream firm in Cournot (Bertrand)competition.