When do first-movers have an advantage? A Stackelberg classroom experiment

Robert Rebelein and Evsen Turkay

The Journal of Economic Education, 2016, vol. 47, issue 3, 226-240

Abstract: The timing of moves can dramatically affect firm profits and market outcomes. When firms choose output quantities, there is a first-mover advantage, and when firms choose prices, there is a second-mover advantage. Students often find it difficult to understand the differences between these two situations. This classroom experiment simulates each scenario in a way that makes it easy for students to understand the theoretical reasons for the different possible outcomes. The authors have developed a two-firm classroom experiment where students first play a Stackelberg game in which firms sequentially choose production quantities and then a Stackelberg game in which firms sequentially choose prices. When choosing quantities, it is advantageous to move first, and when choosing prices, it is advantageous to wait.

Date: 2016
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DOI: 10.1080/00220485.2016.1179144

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