In a Cournot duopoly, firms make their moves at the same time while in Stackelberg duopoly, one firm becomes the leader and so make the first move, followed by the other firm. ... The profit gained by each firm when both are competing in a Cournot duopoly and Stackelberg duopoly model were derived and compared.
Is Cournot or Stackelberg more efficient?
Stackelberg markets yield, regardless of the matching scheme, higher outputs than Cournot markets and, thus, higher efficiency . For Cournot markets, we replicate a pattern known from previous experiments. There is stable equilibrium play under random matching and partial collusion under fixed pairs.
What is different between the Cournot and Stackelberg models?
What is one difference between the Cournot and Stackelberg models? A) In Cournot, both firms make output decisions simultaneously, and in Stackelberg, one firm sets its output level first . ... In Stackelberg, both firms make output decisions simultaneously, and in Cournot, one firm sets its output level first.
What type of market is Stackelberg?
Stackelberg model is a leadership model that allows the firm dominant in the market to set its price first and subsequently, the follower firms optimize their production and price. It was formulated by Heinrich Von Stackelberg in 1934.
How does the Cournot model of oligopoly differ from the Stackelberg model?
In the Cournot model, both firms make their choices simultaneously and have no communication beforehand . In the Stackelberg model, Firm 1 not only announces first, but Firm 2 knows that when Firm 1 announces, Firm 1’s actions are credible and fixed.
Does Stackelberg have first mover advantage?
In Stackelberg games, being able to act first is an advantage in certain situations and a disadvantage in others . ... In a Stackelberg game, the firms make decisions sequentially rather than simultaneously. The second mover observes the choice of the first mover and chooses its best action accordingly.
Can the leader ever get a lower profit in a Stackelberg equilibrium than he would get in the Cournot equilibrium?
In a simple duopoly model, the price in a Stackelberg equilibrium is lower than that in a Cournot equilibrium1. ... If the original incumbent acts as a Stackelberg leader when entry has taken place, post-entry profits for the entrant will be lower than in case of Cournot competition. Therefore, entry is less attractive.
What is Bertrand model and the assumptions behind it?
Bertrand competition is a model of competition in which two or more firms produce a homogenous good and compete in prices . Theoretically, this competition in prices, providing the goods are perfect substitutes, ends with the firms selling their goods at marginal costs and thus making zero profits.
What is the difference between Cournot and Bertrand?
The Cournot model considers firms that make an identical product and make output decisions simultaneously . The Bertrand model considers firms that make and identical product but compete on price and make their pricing decisions simultaneously.
What are the three oligopoly models?
We have now covered three models of oligopoly: Cournot, Bertrand, and Stackelberg . These three models are alternative representations of oligopolistic behavior. The Bertand model is relatively easy to identify in the real world, since it results in a price war and competitive prices.
Is Stackelberg Pareto optimal?
The situation is described by the so-called Stackelberg game. The players of lower rank, called followers, react to decisions made by the first rank player, also called the leader. ... We derive conditions under which we show that a Stackelberg equilibrium is indeed a Pareto optimum .
What do the Cournot and Bertrand models have in common?
What do the Cournot and Bertrand models have in common? The Cournot and Bertrand models have in common that firms produce a homogenous good . What is different about the two models? firms earn positive economic profits under the Cournot model but earn zero profits under the Bertrand model.
What are oligopoly models?
An oligopoly is defined as a market structure with few firms and barriers to entry . ... Since there are a small number of firms in an oligopoly, each firm’s profit level depends not only on the firm’s own decisions, but also on the decisions of the other firms in the oligopolistic industry.
What is an example of Cournot Oligopoly?
The real world examples for Cournot oligopoly are the OPEC countries in which those countries decides how much oil they will produce because the amount of oil produced affects the price of oil in the market.
