The Stackelberg
Leader-Follower Model (Stackelberg Equilibrium)
Heinrich von Stackelberg
presented the third important
oligopoly model in 1934. In the Stackelberg
model, firms set output (not price) and one
firm acts before the others.
The leader
firm picks its output level and
then the other firms are free to choose their
optimal quantities given their knowledge of
the leader's output.
For example, the
firm that discovers and develops a new product
has a natural first-mover advantage.
Example :
Same data than in Cournot
Model.
Cost function of each of the
two firms : TC = 0.000001q3- 0.014q2 + 69q + 128'000
Market Demande curve : q = 19'500 - 100p
Market Price function :p = 195 - 0.01q
Suppose firm F1 is
the leader and the firm F2 the follower. Firm
F1 realizes that once it sets its output, the
follower firm F2 will use its Cournot best-response
function to pick its optimal q2.
The output choosen
by F1 is 6000 units. Then the output choosen
by F2 is calculated by using the Best-Response
Function : [q2 = 7950 - 0,5q1] = 4950 units
F |
Output |
P |
R |
TC |
Profit |
F1 (leader) |
6'000 |
85.50 |
513'000 |
254'000 |
259'000 |
F2 (follower) |
4'950 |
85.50 |
423'225 |
247'802 |
175'423 |
Market |
10'950 |
85.50 |
936'225 |
501'802 |
434'423 |
Sources
:
Modern Industrial Organization, 2nd edition, Dennis .W. Carlton , Jeffrey .M. Peroloff, Addfison-Wesley, 1994
Economie Industrielle ( traduction de la 2ème édition par Fabrice Mazerolle), Dennis .W. Carlton , Jeffrey .M. Peroloff, de Boeck Université, 2008
Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997
Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998
Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, US
Cours de Microéconomie,
Prof Bernard Jaquier, 2003
(c) ECOFINE.COM, Bernard Jaquier, Professor in Economics and
Finance, Switzerland, 2020