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Example: Stackelberg model Responding to a competitor’s advertisement campaign. Entry decisions. Responding to a regulatory policy.
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8 Sequential Game In the product choice game, if both the firms announce their decisions simultaneously, there is multiple Nash equilibrium. What if firm 1 speed up production and introduce new cereal first? In this sequential game, Firm 1 (the leader) considers firm 2’s (follower) potential reaction before making its own choice (Stackelberg Model).