Endogenous Co-Leadership When Demand Is Unknown

M. Hirokawa and D. Sasaki

No 669, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Consider an oligopolistic industry where demand uncertainty resolves after at least one firm has engaged in production. Those firms who produce first behave as simultaneous leaders (co-leaders), whilst those who produce after demand becomes observable will be followers. Each follower simply plays an individual best response. On the other hand, each co-leader takes only other co-leader's production quantities as given. Using simple linear demand, we establish that he number of co-leaders monotically decreases in the magnitude of demand uncertainty relative to the expected level of demand. We also find that, with demand uncertainty and the possibility of Stackelberg behaoviour, whether the excess entry theorem applies depends upon the number of existing followers.

Keywords: OLIGOPOLIES; PRODUCTION CONTROL; UNCERTAINTY (search for similar items in EconPapers)
JEL-codes: C72 D43 L13 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:mlb:wpaper:669

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