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Do Firms Sell What They Produce or Produce What They Sell?

Kurt Annen

No 1606, Working Papers from University of Guelph, Department of Economics and Finance

Abstract: In economic models, "sales equals production" is typically treated as an identity and not as an equilibrium outcome. This distinction, however, matters when production is sequential because of off-equilibrium path behavior. This paper shows that the first mover advantage in the standard Stackelberg oligopoly game may be reduced when "sales equals production" is no longer treated as an identity. Moving rst does not per se produce a strategic advantage. It is only first moves that are suciently costly that produce this advantage. With costless production, the advantage disappears completely and the Cournot outcome is obtained.

Keywords: Oligopoly; Stackelberg competition; sales versus production (search for similar items in EconPapers)
JEL-codes: L13 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2016
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