A note on Stackelberg competition

This note investigates a Stackelberg—Nash competition model. We determine the conditions under which the leaders may achieve better profits than the followers when all firms compete on quantity in a two stage game. We focus on the properties of the followers' best response functions. It is show...

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Bibliographic Details
Published in:Journal of economics (Vienna, Austria) Austria), 2011-06, Vol.103 (2), p.171-187
Main Author: Julien, Ludovic A.
Format: Article
Language:English
Subjects:
Competition
Costs
Demand curves
Demand functions
Duopolies
Economic models
Economic theory
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Effective demand
Elasticity of demand
Equilibrium
Equilibrium prices
Game Theory
Leadership
Macroeconomics/Monetary Economics//Financial Economics
Marginal costs
Market demand
Market equilibrium
Microeconomics
Modelling
Nash equilibrium
Oligopolies
Price elasticity
Price functions
Profit maximization
Public Finance
Social and Behav. Sciences
Strategic behaviour
Studies
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Summary:This note investigates a Stackelberg—Nash competition model. We determine the conditions under which the leaders may achieve better profits than the followers when all firms compete on quantity in a two stage game. We focus on the properties of the followers' best response functions. It is shown that the Stackelberg equilibrium may coincide with the Cournot equilibrium. In addition, the followers may achieve higher profits than the leaders. Such results put forward the working and the consequences of strategic complementarities. These results are illustrated with three examples.
ISSN:0931-8658
1617-7134
DOI:10.1007/s00712-010-0187-3