Time to Market and Impatient Customers

Abstract

We analyse the decision of firms about when to launch their products on the market when they produce differentiated goods and compete on prices. We find two subgame perfect equilibria: one in which the high‐quality firm holds its leadership in quality, and another in which the low‐quality firm leapfrogs its rival. When the initial level of differentiation is high enough, the low‐quality firm always launches first. Finally, we extend this model to analyse commercial piracy. We obtain that pirates are highly unlikely to launch the illegal copy first because they would bear a higher penalty and a higher risk of being detected.