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Endogenous Stackelberg Leadership

Eric van Damme and J.P.M. Hurkens

No 1996-115, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: We consider a linear quantity setting duopoly game and analyze which of the players will commit when both players have the possibility to do so.To that end, we study a 2-stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2.We show that committing is more risky for the high cost rm and that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the low cost rm will choose to commit.Hence, the low cost firm will emerge as the endogenous Stackelberg leader.

Keywords: game theory; duopoly (search for similar items in EconPapers)
JEL-codes: C72 D43 (search for similar items in EconPapers)
Date: 1996
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Journal Article: Endogenous Stackelberg Leadership (1999) Downloads
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