What is Stackelberg game theory?
The Stackelberg leadership model is a strategic game in economics in which the leader firm moves first and then the follower firms move sequentially. In game theory terms, the players of this game are a leader and a follower and they compete on quantity.
What are the basic assumptions of the Stackelberg model?
The standard assumptions are (1) linear demand, and (2) constant marginal costs, (3) identical firms producing a homogeneous product. Under these assumptions, there is a simple relationship between the competitive quantity and leaders’ choices.
Why is Stackelberg more efficient than Cournot?
Stackelberg markets yield, regardless of the matching scheme, higher outputs than Cournot markets and, thus, higher efficiency. For Cournot markets, we replicate a pattern known from previous experiments. There is stable equilibrium play under random matching and partial collusion under fixed pairs.
What are the main differences between the assumptions of the Cournot thee Bertrand and the Stackelberg model of oligopoly?
The Bertrand model considers firms that make and identical product but compete on price and make their pricing decisions simultaneously. The Stackelberg model considers quantity setting firms with an identical product that make output decisions simultaneously.
Who has advantage in Stackelberg?
Stackelberg Bertrand model This implies that when one firm chooses a relatively large price, the other firm also will want to choose a relatively large price, and vice versa. In this situation, the firm that gets to choose second generally has an advantage in terms of the amount of profit they can make.
What is the essential difference between the Cournot and Stackelberg models?
In a Cournot duopoly, firms make their moves at the same time while in Stackelberg duopoly, one firm becomes the leader and so make the first move, followed by the other firm.
What type of market is the Stackelberg model?
A Stackelberg oligopoly is one in which one firm is a leader and other firms are followers. 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.
When firm one acts as a Stackelberg leader?
When firm one acts as a Stackelberg leader: none of the above statements Firm two produces the monopoly output. Firm one’s profit is less than its profit if they compete in a Cournot fashion. Firm two will earn more than if they compete in a Cournot fashion.
What is the difference between Cournot and Stackelberg?
What kind of competition is the Stackelberg model?
Stackelberg competition. The Stackelberg leadership model is a strategic game in economics in which the leader firm moves first and then the follower firms move sequentially.
What are the applications of Stackelberg differential games?
Stackelberg differential games are also used to model supply chains and marketing channels. Other applications of Stackelberg games include heterogeneous networks, robotics, autonomous driving, and electrical grids.
Who is the founder of the Stackelberg leadership model?
The Stackelberg leadership model is a strategic game in economics in which the leader firm moves first and then the follower firms move sequentially. 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.
Which is the best response to a Stackelberg action?
Indeed, if the ‘follower’ could commit to a Stackelberg leader action and the ‘leader’ knew this, the leader’s best response would be to play a Stackelberg follower action. Firms may engage in Stackelberg competition if one has some sort of advantage enabling it to move first.