Can the leader ever get a lower profit in a Stackelberg equilibrium than he would get...

Can the leader ever get a lower profit in a Stackelberg equilibrium than he would get in the Cournot equilibrium?

Expert Solution

Yes, the leader ever get a lower profit in a Stackelberg equilibrium than he would get in the Cournot equilibrium.

•At the point when the two firms attempt to be a pioneer it brings about a value war. Both the firm are more terrible off and consequently their benefit turns out to be not exactly Cournot balance.

Stackelberg equilibrium:

•Stackelberg equilibrium is a model dependent on non-tricky oligopoly. As in Cournot harmony, we ascertain the yield dependent on activity response as they pick amount to deliver all the while and freely.

•Yet, in Stackelberg balance first firm picks the amount and the other one structures the rest of the yield out of it. Cournot is a concurrent game though Stackelberg harmony is a consecutive game.

•Also,

What's more, on the off chance that the two firms go about as a devotee, at that point Stackelberg balance may change into the Cournot model.

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Rahul Sunny answered 2 years ago

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