Stackelberg Independence

Toomas Hinnosaar

No 585, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: The standard model of sequential capacity choices is the Stackelberg quantity leadership model with linear demand. I show that under the standard assumptions, leaders’ actions are informative about market conditions and independent of leaders’ beliefs about the arrivals of followers. However, this Stackelberg independence property relies on all standard assumptions being satisfied. It fails to hold whenever the demand function is non-linear, marginal cost is not constant, goods are differentiated, firms are non-identical, or there are any externalities. I show that small deviations from the linear demand assumption may make the leaders’ choices completely uninformative.

Keywords: sequential games; oligopolies; Stackelberg leadership model. (search for similar items in EconPapers)
JEL-codes: C72 C73 D43 L13 (search for similar items in EconPapers)
Pages: pages 22
Date: 2019
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Related works:
Journal Article: Stackelberg Independence (2021)
Working Paper: Stackelberg Independence (2020)
Working Paper: Stackelberg Independence (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:585

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