We have benefited a lot from the comments and suggestions of the Editor and anonymous referees. All remaining errors are the authors’ responsibility.
First Versus Second Mover Advantage with Information Asymmetry about the Profitability of New Markets†
Article first published online: 17 OCT 2012
© 2012 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 60, Issue 3, pages 374–405, September 2012
How to Cite
Rasmusen, E. and Yoon, Y.-R. (2012), First Versus Second Mover Advantage with Information Asymmetry about the Profitability of New Markets. The Journal of Industrial Economics, 60: 374–405. doi: 10.1111/j.1467-6451.2012.00487.x
- Issue published online: 17 OCT 2012
- Article first published online: 17 OCT 2012
Is it better to move first, or second—to innovate, or to imitate? We show that if one player's information about the profitability of new markets is only modestly superior, the possibility of foreclosing the market can lead to a first-mover advantage. On the other hand, more extreme information superiority can reverse this, leading to a second-mover advantage. Knowing more surely what is the best choice, the better-informed player wants to delay to keep his information private and the less-informed player wants to delay to learn. Because of this, more accurate information can actually lead to inefficiency by increasing the incentive to delay, and exogenous costs of delay can aid efficiency by neutralizing that strategic incentive. In fact, in some circumstances a player may purposely coarsen his information to deter imitation.