LEPPANEN, I., 2019. Partial commitment in an endogenous timing duopoly. Annals of Operations Research, In Press.
A duopoly game with timing announcements endogenizes the sequence of commitments. In duopolistic price competition, endogenous moves lead to a coordination problem with two non-Pareto ranked subgame perfect equilibria (SPEs). In these SPEs both
firms prefer followership to leadership. We suggest that a unique SPE can be found if
firms use partial commitments to their timing announcements. Using partial commitments,
the firms first announce the timing of moves but reserve the option to deviate from this
announcement and pay a deviation cost. We show that given a sufficient asymmetry in
stochastic production technologies, there exists a unique SPE with sequential moves if the
deviation costs are sufficiently different or if a common deviation cost belongs to a suitable
interval. We also discuss the information sharing implications of the results and find that
information is not shared at the unique SPE. partial commitments endogenous timing price
competition cost uncertainty
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