Sequential Entry in a Vertically Differentiated

We analyse a model of vertical differentiation focusing on the trade-off be-tween entering early and exploiting monopoly power with a low quality, ver-sus waiting and enjoying a dominant market position with a superior product. We show that there exists a unique equilibrium where the leader enters with a lower quality than the follower, for low discount factors, for high costs of quality and for low consumers ’ willingness to pay for quality. J.E.L. Classification: L13, O3