If you can commit to the stackelberg leader quantity

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Unformatted text preview: ses profits for the “leader” firm. – Under Cournot, each firm makes $900. – With sequential moves, the “Stackelberg leader” makes $1,012.50, while the “Stackelberg follower” makes $506.25. • How do profits compare to the Cournot Equilibrium profits? M&S 452 — Strat and Org c 2008 Scott Schaefer T e e e e Q∗ = 30 2 45 rr Q2 e e e e e e R Q∗ = 30 1 45 Q1 e e rr e rr e re rr er e rr rr e rr e r e rr 2 e rr e r rr e rr e r e rE e r rr e e e e e R1 20 19 • Why? • If you can commit to the Stackelberg leader quantity (by, for example, actually building your plant), then you can earn Stackelberg leader profits. Just saying you’re going to play the Stackelberg outcome isn’t sufficient, because this statement is not credible. M&S 452 — Strat and Org c 2008 Scott Schaefer M&S 452 — Strat and Org c 2008 Scott Schaefer e T e e e Q∗ = 30 2 45 rr Q2 R Q∗ = 30 1 45 Q1 e e e e rr e re rr u er e rr rr u eu rr e r e rr 2 e rr e r rr e rr e r e rE e r e e e e e rr rr e e e e e R1 22 21 •...
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This document was uploaded on 02/20/2014.

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