First or second mover advantage

1
First or second mover advantage?
2
Quantity Competition

• Two firms are competing in a market by offering
  goods to be sold at the equilibrium price.
• Both have the same cost structure
• Equal marginal cost function assume convex.
• How does a firm react when the other firm puts
  more good to sale?
• Price must be going down
• Marginal benefit is going down
• Marginal cost must go down too reduce the amount
  offered?

3
Quantity Competition

• Strategic variables move in opposite directions.
• Would you like in this market to claim your price
  first or second?
• Think Cournot
• Intuition
• You increase the quantity supplied and pressure
  the price down
• Your opponent will reduce the quantity supplied
  attenuating the price reduction
• You sell more and the price has not decline a lot.

4
Price Competition

• Two firms are competing in a market
• Both have the same cost structure
• Equal marginal costs assume 0.
• How does a firm react when the other firm lowers
  the price?
• Strategic variables move together positive
  relation
• Would you like in this market to claim your price
  first or second?

5
General Statement

• When two identical players move sequentially in
  a game, the player that moves first earns lower
  (higher) profits than the player that moves
  second if the strategic variables are
  complements (substitutes).
• Ester Gal-Or, International Economic Review
• 1985, Vol. 25, No. 3.