Lecture 4

Question 1

What is a Stackelberg Competition

Answer 1

• Leader and follower (sequential)
• Leader has first mover advantage (current monopoly or excess capacity)
• Competing in quantities
• Perfect Information
• Use backwards induction (find q2 first then use that to find q1)
• Cournot Q < Stackelberg Q < Bertrand Q
• Bertrand P < Stackelberg P < Cournot P