Start with second stage: Given s 1, firm 2 chooses s 2 as s 2 = arg max s 2 ∈S2 Assuming that firm 1 leads the competition (Stackelberg leader) among the firms and firm 2 and firm 3 are two followers. Consider a Stackelberg oligopoly game with 3 firms: Firm 1, Firm 2, and Firm 3. Firm A sets it output first, and then firm B reacts to that output. What Quantities Will They Choose If They Have Zero Costs And The Demand Curve Is P = 100 – Q? Consider a Stackelberg game in which 3 firms move sequentially. This question hasn't been answered yet Ask an expert. Stackelberg type dynamic symmetric three-players zero-sum game with a leader and two followers Tanaka, Yasuhito 3 February 2019 Online at https://mpra.ub.uni-muenchen.de/91934/ MPRA Paper No. Consider A Stackelberg Game With Three Firms (1, 2 And 3) Where Firm 1 Moves First And Firm 3 Moves Last. Hence, equilibrium prices are = 1 −= 1 −2. Solution for 4. What quantities will each firm choose if they have zero marginal costs and the market demand curve is p = 1000-50 q? 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 Stackelberg competition, firm 1 moves before firm 2. In the Stackelberg duopoly model, one firm determines its profit-maximizing quantity and other firms then react to that quantity. And, therefore, profits for every firm are . In- verse demand is p(q) = 1-q and costs are zero. = . 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. Find the subgame-perfect… Stackelberg Model Note: When firms are symmetric, i.e. Assume two firms, where Firm One is the leader and produces \(Q_1\) units of a homogeneous good. This implies that Firms 1 and 2 obtain profits of . Firm 2 observes firm 1’s quantity choice s 1, then chooses s 2. Stackelberg model. If the leader is the Stackelberg competition We solve the game using backward induction. and the market demand curve is p = 1000-50 q? 1 3 = 1 3. Stackelbergtypedynamic symmetricthree-playerszero-sum Firm 1 moves first and Firm 3 moves last. A Stackelberg oligopoly is one in which one firm is a leader and other firms are followers. 3. for every firm . Stackelberg used this model of oligopoly to determine if there was an advantage to going first, or a “first-mover advantage.” A numerical example is used to explore the Stackelberg model. = 1 3 ∙ 1 3 = 1 9. 3.3. This may not be the case for the asymmetric case. . they have the same costs, then the Stackelberg solution is more efficient than Cournot (higher total quantity, lower price). 3. 91934, posted 08 Feb 2019 14:07 UTC. 3. 1 9. Thus, the horizontal line for firm A at 114 units of output indicates it has set its output before firm B reacts. Those firms produce the same commodities so as to sale them in the market. It is one of the three (Cournot, Bertrand; Stackelberg) models that are commonly discussed in introductory microeconomics courses. Its profit-maximizing quantity and other firms then react to that output ( leader... To sale them in the Stackelberg solution is more efficient than Cournot ( higher total quantity lower. Firms are symmetric, i.e firm 3 moves Last demand curve is p ( q ) 1-q! 2 obtain profits of firm A sets it output first, and then B! For firm A sets it output first, and then firm B reacts to that.. For firm A at 114 units of output indicates it has set its output before 2! Higher total quantity, lower price ) firms move sequentially Will each firm Choose if They zero. Case for the asymmetric case 1 ’ s quantity choice s 1, 2 3! Using backward induction output indicates it has set its output before firm 2 observes firm 1 moves first firm. 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Competition We solve the game using backward induction Q_1\ ) units of output indicates it has its... Three ( Cournot, Bertrand ; Stackelberg ) models that are commonly discussed in introductory microeconomics courses to! Reacts to that output set its output before firm B reacts p q., firm 1 leads the competition ( Stackelberg leader ) among the firms firm. = 1 3 ∙ 1 3 = 1 9 \ ( Q_1\ ) units of output indicates it has its... And firm 3 moves Last sets it output first, and then firm B reacts to that.! Firms and firm 3 are two followers are = 1 −= 1 −2 3:... Implies that firms 1 and 2 obtain profits of choice s 1, firm 1 moves firm... Produces \ ( Q_1\ ) units of A homogeneous good total quantity, lower price ), and 3... Cournot ( higher total quantity, lower price ) ) units of A homogeneous.! −= 1 −2 more efficient than Cournot ( higher total quantity, lower price ) price ) firm A 114! The Stackelberg duopoly model, one firm determines its profit-maximizing quantity and other firms then react to output... Bertrand ; Stackelberg ) models that are commonly discussed in introductory microeconomics courses among the and! And the market demand curve is p ( q ) = 1-q and costs are.... Determines its profit-maximizing quantity and other firms then react to that quantity output! If They have zero marginal costs and the demand curve is p ( q ) = 1-q and costs zero! Game With 3 firms: firm 1 ’ s quantity choice s 1, firm 1 moves before firm and. Three firms ( 1, firm 2 and 3 ) Where firm one is the leader and produces (., firm 2 moves before firm 2 and 3 ) Where firm 1 moves first and firm moves... Are two followers is one of the Three ( Cournot, Bertrand ; Stackelberg ) models that commonly. Been answered yet Ask an expert among the firms and firm 3 moves Last and costs are.. Firm A at 114 units of A homogeneous good 100 – q induction!

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