Endogenous Stackelberg Leadership

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 two-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 mor...

Full description

Saved in:
Bibliographic Details
Published inGames and economic behavior Vol. 28; no. 1; pp. 105 - 129
Main Authors van Damme, Eric, Hurkens, Sjaak
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.07.1999
Elsevier
SeriesGames and Economic Behavior
Subjects
Competition
Duopoly
Game theory
Linear models
Market structure
Pricing
Risk
Two-person games
Online AccessGet full text

Cover

More Information
Summary: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 two-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 firm and that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the low cost firm will choose to commit. Hence, the low cost firm will emerge as the endogenous Stackelberg leader. Journal of Economic Literature Classification Numbers: C72, D43.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0899-8256
1090-2473
DOI:10.1006/game.1998.0687