Is Stackelberg sequential?
In game theory, a Stackelberg duopoly is a sequential game (not simultaneous as in Cournot’s model). There are two firms, which sell homogeneous products, and are subject to the same demand and cost functions.
What is the Stackelberg price?
A Stackelberg price leader charges significantly more than the pure Nash equilibrium price, induces its neighbors to charge somewhat more than the pure Nash equilibrium price, and increases its profits.
Is the Stackelberg equilibrium A Nash equilibrium?
The Stackelberg model can be solved to find the subgame perfect Nash equilibrium or equilibria (SPNE), i.e. the strategy profile that serves best each player, given the strategies of the other player and that entails every player playing in a Nash equilibrium in every subgame.
How does the Stackelberg equilibrium differ from the Cournot equilibrium?
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.
In what sense is Stackelberg equilibrium different from Cournot equilibrium?
The difference between Cournot and Stackelberg equilibrium is that Cournot equilibrium ischosen in a way that each firm maximizes their profit. In Stackelberg equilibrium, only onefirm maximizes their profits.
What is different between the Cournot and Stackelberg models?
What is the Stackelberg equilibrium of the game?
The perfect equilibrium of the game is the Stackelberg equilibrium. In this game, the leader has decided not to behave as in the Cournot’s model, however, we cannot ensure that the leader is going to produce more and make more profits than the follower ( production will be larger for the firm with lower marginal costs ).
Is the Stackelberg duopoly more efficient than the Nash equilibrium?
The Nash equilibrium is not Pareto efficient (isoprofit curves, green curves, are not tangent to each other) and therefore, there is a loss in economic efficiency. Nevertheless, the loss is lower in the Stackelberg duopoly than in Cournot’s.
How does the Stackelberg model compare with other oligopoly models?
In comparison with other oligopoly models, The aggregate Stackelberg output is greater than the aggregate Cournot output, but less than the aggregate Bertrand output. The Stackelberg price is lower than the Cournot price, but greater than the Bertrand price.