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
This study examines a first-mover and a second-mover advantage in a vertical structure in which each upstream firm trades with an exclusive retailer and downstream retailers move 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 (equal to its marginal cost), while the follower’s upstream firm sets the input price below its marginal cost (above its marginal cost). The other is that the follower’s (leader’s) upstream firm enjoys higher profits than the leader’s (follower’s) upstream firm in Cournot (Bertrand) competition.