The Firms Face The Market Demand Curve P = 130 – Q And Have Identical Cost Functions C;(qi) = 10qi. In the Stackelberg model, the leader decides how much output to produce with other firms basing their decision on what the leader chooses. a) Suppose that the two firms decide to form a cartel. This may not be the case for the asymmetric case. x�S0PpW0PHW��P(� � Another common form of leadership is for the leading firm to set price. stream Firm 2 observes firm 1’s quantity choice s 1, then chooses s 2. In this paper, I first show that under the standard assumptions of the Stackelberg model, the questions stated above are easy to answer. For example, entry of an additional firm may increase the quantities and/or profits of some existing firms; it may also increase the total industry profit. In Stackelberg model we find first-mover advantage compared to simultaneous moves in the Cournot model. The Stackelberg equilibrium price is lower, so output and total surplus are higher; total profits are lower. We thank Jonathan Eaton, Charlie Holt, and two anonymous referees for valuable suggestions, and Xiao-Ling Huang for research assistance. If the two firms form a cartel, they will collectively produce the monopoly level of output. For example, entry of an additional firm may increase the quantities and/or profits of some existing firms; it may also increase the total industry profit. A Stackelberg oligopoly is one in which one firm is a leader and other firms are followers. Stackelberg competition We solve the game using backward induction. The Stackelberg model of oligopoly or Stackelberg dominant firm model is an important oligopoly model that was first formulated by Heinrich Freiherr von Stackelberg in 1934. In the Stackelberg model, A. each firm takes the quantities produced by its rivals as given. C. Both A and B are correct. Stackelberg’s Model of Duopoly also has to do with companies trying to decide how much of a homogeneous good to produce. This model applies where: (a) the firms sell homogeneous products, (b) competition is based on output, and (c) firms choose their output sequentially and not simultaneously. endstream Firm A sets it output first, and then firm B reacts to that output. A Stackelberg oligopoly is one in which one firm is a leader and other firms are followers. It is named after the German economist Heinrich Freiherr von Stackelberg who published Market Structure and Equilibrium (Marktform und Gleichgewicht) in 1934 which described the model.. The Stackelberg model is about strategic competition. Market demand P = 1 Q Two firms. This paper extends the Stackelberg model to include any number of nonidentical firms and demonstrates significant counterintuitive results. Question: 3. We compare an m-firm Cournot model with a hierarchical Stackelberg model where m Firms choose outputs sequentially. The marginal cost of produc- tion in each firm is c. The demand is p (q) = A − B q. Finally we consider a game (with firms choosing whether to reveal their outputs) which includes Stackelberg and Cournot as possible outcomes: the equilibrium is Stackelberg. If the leader is the ��[�k�ڏ��k �%��@aM:% �t�I&/���;��)��3�=��?~�Fw����E�����sQ:�y�S4��\^ND�Y�E����R�Fݼ9�Pvw�-+s�F�Ǧ���� Stackelberg Model. B. each firm takes the prices charged by its rivals as given. Stackelberg A Simple Model Heinrich von Stackelberg (1934). The Firms Face The Market Demand Curve P = 130 – Q And Have Identical Cost Functions C;(qi) = 10qi. Copyright © 1992 Published by Elsevier B.V. International Journal of Industrial Organization, https://doi.org/10.1016/0167-7187(92)90052-Z. 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