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Do followers really matter in Stackelberg competition?

Ludovic Julien, Olivier Musy and Aurélien W. Saïdi

No 2011-10, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: In this note, we consider a generalized T−stage Stackelberg oligopoly. We provide a proof and an interpretation that under the two necessary and sufficient conditions of linear aggregate demand and identical constant marginal costs, followers do not matter for leaders. Leaders act as rational myopic agents, voluntarily ignoring the number of followers and remaining stages, thereby behaving as Cournotian oligopolists. Strategies of incumbent firms are invariant to entry of new cohorts. Their profits can be studied by the way of two discount factors: the first impacting markup and the second impacting output supply. Some implications in terms of welfare and convergence toward competitive equilibrium are derived.

Keywords: Leader’s markup discount factor; linear economy; follower’s output discount factor; myopic behavior (search for similar items in EconPapers)
JEL-codes: L13 L20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-ind
Date: 2011
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Journal Article: Do Followers Really Matter in Stackelberg Competition? (2011) Downloads
Journal Article: Do Followers Really Matter in Stackelberg Competition? (2011) Downloads
Working Paper: Do followers really matter in Stackelberg competition? (2011)
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