When is the Stackelberg variant of oligopoly competition more appropriate than the standard Cournot model? Group...

When is the Stackelberg variant of oligopoly competition more appropriate than the standard Cournot model?

Group of answer choices

when the firms are trying to collude.

when one firm makes its output decision before the others.

whenever there are more than two firms.

when all firms enter the market simultaneously.

Solutions

Expert Solution

WHEN ONE FIRM MAKES ITS OUTPUT DECISION BEFORE THE OTHER. (is correct)

Cournot duopoly model is a simultaneous move game. In which firm choose their output level together by producing best response of other player production.

While in Stackelberg is sequential move game the bigger firm move first means the firms who produce in large quantities choose their output level. After that other firms produce their output level.

The firm who chooses first is the leader firm and the firm who choose production later is the follower.

Rahul Sunny answered 2 years ago

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