Economics at your fingertips  

Stackelberg Equilibrium of the Client and the Producer of Embedded Software

Vrankić Ilko (), Mirjana Pejić Bach () and Krpan Mira ()
Additional contact information
Krpan Mira: Faculty of Economics and Business, University of Zagreb, Croatia

Business Systems Research, 2014, vol. 5, issue 1, 68-76

Abstract: Background: Our research assumes that the software quality affects the product validity. This assumption also refers to embedded software. Objectives: This paper analyses the Stackelberg equilibrium in which the consumer is the leader and the producer of embedded software is the follower. Methods/Approach: A comparative statics analysis of a producer's reaction is carried out and confirms our intuition that the product price is positively correlated to the number of employees and the software quality. Results: An increase in wage has an adverse effect on producer’s reaction. Derived results are illustrated numerically and Stackelberg and cooperative equilibrium are compared. It is shown that the welfare loss is smaller with higher quality software for any number of employees. Conclusions: Although the equilibrium involves less employed workers, the optimal software quality is higher. The optimal product price is lower, which puts the consumer and the producer in a better position

Keywords: embedded software; Stackelberg equilibrium; producer's reaction function; comparative statics analysis; welfare loss (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.2478/bsrj-2014-0006

Access Statistics for this article

Business Systems Research is currently edited by Mirjana Pejić Bach

More articles in Business Systems Research from Sciendo
Bibliographic data for series maintained by Peter Golla ().

Page updated 2021-10-20
Handle: RePEc:bit:bsrysr:v:5:y:2014:i:1:p:68-76