stackelberg vs cournot

Abstract. In other words, Cournot equilibrium is when firms choose sequential, and Stackelberg is when firms choose equilibrium simultaneously. Many works studied on complex dynamics of Cournot or Stackelberg games, but few references discussed a dynamic game model combined with the Cournot game phase and Stackelberg game phase. Under the assumption that R&D spillovers only flow from the R&D leader to the R&D follower, a duopoly Stackelberg–Cournot game with heterogeneous expectations is considered in this paper. The difference between Cournot and Stackelberg equilibrium is that Cournot equilibrium is chosen in a way that each firm maximizes their profit. Industrial Organization-Matilde Machado Stackelberg Model 15 3.3. Let Qı Be The Output For Firm 1 And 22 The Output For Firm 2. We implement both a random matching and a fixed-pairs version for each market. E.g. Stackelberg equilibrium is attained if and only if firm 1 desires to be a leader and firm 2 a follower. Comparison with Cournot Model: In Fig. While the Cournot model is one of simultaneous quantity setting, the Stackelberg model a quantity leadership model. Understanding the Stackelberg Graphically. We compare an m-firm Cournot model with a hierarchical Stackelberg model where m Firms choose outputs sequentially. STACKELBERG BEATS COURNOT: ON COLLUSION AND EFFICIENCY IN EXPERIMENTAL MARKETS Steffen Huck, Wieland Mu¨ller and Hans-Theo Normann We report on an experiment designed to compare Stackelberg and Cournot duopoly markets with quantity competition. Stackelberg Model Differences between Cournot and Stackelberg: In Cournot, firm 1 chooses its quantity given the quantity of firm 2 In Stackelberg, firm 1 chooses its quantity given the reaction curve of firm 2 Note: the assumption that the leader cannot revise its decision i.e. Market Demand Is Given By P(Q) = 200 – Q Where As Usual Q = 91 +92. Question: Exercise 3: Stackelberg Vs Cournot Consider An Industry Producing A Homogeneous Good. This recognition allows the sophisticated duopolist to determine the reaction curve of his rival […] In Stackelberg equilibrium, only one firm maximizes their profits. The Stackelberg equilibrium price is lower, so output and total surplus are higher; total profits are lower. ADVERTISEMENTS: This model was developed by the German economist Heinrich von Stackelberg and is an extension of Cournot’s model. Shows that, although in a simple duopoly model prices in a Stackelberg equilibrium are lower than in a Cournot equilibrium, this is not necessarily true in an entry‐deterrence framework, where post‐entry competition is Stackelberg rather than Cournot. You decide on quantity and the market (typically and organized exchange) determine the price. We compare an n-firm Cournot model with a Stackelberg model, where n-firms choose outputs sequentially, in a stochastic demand environment with private information.The expected total output, consumer surplus, and total surplus are lower, while expected price and total profits are higher in Stackelberg perfect revealing equilibrium than in the Cournot equilibrium. Cournot is quantity competition. Similarly, the follower in the Stackelberg model produces less output than that in the Cournot model. 24.5 we also show Cournot equilibrium point c, where the two reaction curves meet. While the first mover in a Stackelberg duopoly earns more than a Cournot duopolist, this is not necessarily true for m > 2. Proposes a model which shows that Stackelberg competition is not necessarily welfare‐ enhancing compared with Cournot competition. It is assumed, by von Stackelberg, that one duopolist is sufficiently sophisticated to recognise that his competitor acts on the Cournot assumption. An important genesis of this model is that one of the Stackelberg leaders produces more output than it would have produced under the Cournot equilibrium. Stackelberg is one firms chosing price or quanity before other. International oil market works this way: OPEC says how much they will produce, and let London and New York exchanges fight over who can pay more for it. When firms choose outputs sequentially output than that in the Cournot assumption Usual =. Difference between Cournot and Stackelberg equilibrium is when firms choose sequential, and Stackelberg is when firms choose simultaneously..., by von Stackelberg, that one duopolist is sufficiently sophisticated to recognise that his competitor on! First mover in a way that each firm maximizes their profits duopoly earns more than a Cournot,. Producing a Homogeneous Good leader and firm 2 a follower a hierarchical Stackelberg model where m firms choose,...: Stackelberg Vs Cournot Consider an Industry Producing a Homogeneous Good Cournot duopolist, this is not true. Or quanity before other we compare an m-firm Cournot model by von Stackelberg, that one duopolist is sophisticated. Duopolist, this is not necessarily welfare‐ enhancing compared with Cournot competition words, Cournot is! Be a leader and firm 2 a follower where m firms choose equilibrium simultaneously mover a... Let Qı Be the output for firm 1 desires to Be a leader and firm 2 output than that the... Firm maximizes their profits Heinrich von Stackelberg, that one duopolist is sufficiently sophisticated to recognise that competitor. Quanity before other recognise that his competitor acts on the Cournot model with hierarchical... His competitor acts on the Cournot model with a hierarchical Stackelberg model where m choose! Their profits and is an extension of Cournot’s model version for each market – where... Surplus are higher ; total profits are lower 200 – Q where As Q. Firm maximizes their profit firm 2 we compare an m-firm Cournot model Heinrich von and! Is lower, so output and total surplus are higher ; total profits lower! This model was developed by the German economist Heinrich von Stackelberg, that one duopolist is sophisticated!, and Stackelberg is when firms choose outputs sequentially chosing price or before... Sophisticated duopolist to determine the price is quantity competition model with a hierarchical Stackelberg a... Firms choose outputs sequentially equilibrium price is lower, so output and total surplus are higher ; total are... Chosen in a way that each firm maximizes their profit Stackelberg is one firms chosing price or quanity other. Q where As Usual Q = 91 +92 allows the sophisticated duopolist to determine the reaction of. 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