What is the difference between Cournot and Stackelberg?

What is the difference between Cournot and Stackelberg?

In a Cournot duopoly, firms make their moves at the same time while in Stackelberg duopoly, one firm becomes the leader and so make the first move, followed by the other firm.

Is Stackelberg a Cournot?

If the leader played a Stackelberg action, (it believes) that the follower will play Cournot. Hence it is non-optimal for the leader to play Stackelberg. In fact, its best response (by the definition of Cournot equilibrium) is to play Cournot quantity.

What are the differences in the Bertrand Cournot and Stackelberg models?

The Bertrand model considers firms that make and identical product but compete on price and make their pricing decisions simultaneously. The Stackelberg model considers quantity setting firms with an identical product that make output decisions simultaneously.

What type of market is the Stackelberg model?

An oligopoly is a market structure characterized by significant interdependence. Common models that explain oligopoly output and pricing decisions include cartel model, Cournot model, Stackelberg model, Bertrand model and contestable market theory.

What is the outcome of the Stackelberg model?

The Stackelberg model is a leadership model that allows the firm dominant to set its price first. Subsequently, the follower firms optimize their production and cost.

What is first mover advantage in Stackelberg model?

The first mover advantage is similar to the Stackelberg model of oligopoly, where the leader firm had an advantage over the follower firm. In many oligopoly situations, it pays to go first by entering a market before other firms.

Do you think that Stackelberg model is superior to Cournot model?

Concerning the Stackelberg markets, we find that the level of output increases. Stackelberg markets yield higher outputs, higher consumer rents and higher welfare levels than Cournot markets, regardless of whether subjects are randomly matched or play in fixed pairs.

What is the outcome of Stackelberg model?

Which type of market do consumers prefer monopoly Cournot duopoly or Stackelberg duopoly?

The total market output is Q* = 7/2+7/4 = 21/4, larger than in Cournot. = Q2 − Q2/2 = Q2/2, which is incerasing in total quantity produced. (this integreation was not required) Therefore consumers prefer the Stackelberg duopoly, which has the highest total production.