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Do Followers Really Matter in Stackelberg Competition?

Ludovic Julien, Olivier Musy and Aurélien Saïdi

Lecturas de Economía, 2011, issue 75, 11-27

Abstract: In this paper, we consider a T-stage linear model of Stackelberg oligopoly. First, we show geometrically and analytically that under the two conditions of linear market demand and identical constant marginal costs, the T-stage Stackelberg model reduces to a model where T oligopolies exploit residual demand sequentially. At any stage, leaders behave as if followers did not matter. Second, we study social welfare and convergence toward competitive equilibrium. Especially, we consider the velocity of convergence as the number of firms increases. The convergence is faster when reallocating firms from the most to the less populated cohort until equalizing the size of all cohorts.

Keywords: leader's markup discount ratio; linear economy; follower's output index; generalized Stackelberg competition (search for similar items in EconPapers)
JEL-codes: L13 L20 (search for similar items in EconPapers)
Date: 2011
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