On Stackelberg competition in strategic multilateral exchange

In this paper, we consider a strategic equilibrium concept which extends Stackelberg competition to cover a general equilibrium framework. From the benchmark of strategic market games proposed by Sahi and Yao (1989), we define the notion of Stackelberg equilibrium. This concept captures strategic in...

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Bibliographic Details
Published in:Research in economics 2013-03, Vol.67 (1), p.59-75
Main Author: Julien, Ludovic A.
Format: Article
Language:English
Subjects:
Convergence
Economics and Finance
Humanities and Social Sciences
Stackelberg general equilibrium
Welfare
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Summary:In this paper, we consider a strategic equilibrium concept which extends Stackelberg competition to cover a general equilibrium framework. From the benchmark of strategic market games proposed by Sahi and Yao (1989), we define the notion of Stackelberg equilibrium. This concept captures strategic interactions in interrelated markets on which a finite number of leaders and followers compete on quantities. Within the framework of an example, convergence and welfare are studied. More specifically, we analyze convergence toward the competitive equilibrium and make welfare comparisons with other strategic equilibria. ► We model Stackelberg competition in interrelated markets. ► The Stackelberg equilibrium concept is defined. ► We also provide an example and make comparisons with other strategic general equilibria. ► The Stackelberg equilibria converge toward the competitive equilibrium when the number of leaders increases unboundedly. ► The Stackelberg and Stackelberg–Cournot equilibria are Pareto dominated by the competitive equilibrium.
ISSN:1090-9443
1090-9451
DOI:10.1016/j.rie.2012.09.001