Incentives in Duopoly with Product Differentiation
نویسندگان
چکیده
This paper studies equilibrium incentives in a vertically differentiated duopoly with price competition. We analyze one simultaneous-move game and two sequential-move games. In a simultaneous-move game, firms' managers determine their prices simultaneously in the first stage of the game and in the second stage two firms determine incentive schemes. One sequential-move game considers the case in which a firm producing high quality product is a Stackelberg leader in the second stage of the game and in the first stage each owner determines an incentive scheme. The other sequential-move game considers the case in which a firm producing low quality product is a Stackelberg leader in the second stage of the game and in the first stage each owner determines an incentive scheme. We derive subgame perfect equilibrium for those games and compare equilibrium incentives.
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