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This chapter considers a continuous-time infinite-horizon duopoly model with complementary products. The chapter investigates the optimal level of labour investment by duopoly firms in a new complementary product industry. Based on the analysis of the model, it is shown that there exist multiple perfect equilibrium outcomes where both firms invest beyond their steady-state reaction curves.
Keywords:
Complementary goods, continuous-time dynamic model, earlystopping equilibrium, labour investment, late-stopping equilibrium, noncooperative game, perfect equilibrium, steady-state reaction curves, strategic complementarity, strategic investment decisions.