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M�h�kg��%��Zk,�V�1ǀ���S@)�YR�ˈ��V"�%��a��2bj^hV�%��=���QO��\�pOpk�~��Q͡w�|�N��O�Ɂ��EN�þeC�-J���>�F���CI�q�M�l��. /ProcSet [ /PDF ] View n8_Stackelberg(1).pdf from AECO 405 at SUNY, Albany. We investigate the (dynamic) stability of a stackelberg oligopoly model of a market of a homogeneous good, with output competition, one Stackelberg leader and a number of identical followers. It was formulated by Heinrich Von Stackelberg in 1934. While the Cournot model is one of simultaneous quantity setting, the Stackelberg model a quantity leadership model. %PDF-1.4 <> endobj /Shading << /Sh << /ShadingType 3 /ColorSpace /DeviceRGB /Domain [0.0 2.5697] /Coords [1.67305 3.6656 0.0 2.5697 2.5697 2.5697] /Function << /FunctionType 3 /Domain [0.0 2.5697] /Functions [ << /FunctionType 2 /Domain [0.0 2.5697] /C0 [0.85 0.85 1] /C1 [0.25 0.25 1] /N 1 >> << /FunctionType 2 /Domain [0.0 2.5697] /C0 [0.25 0.25 1] /C1 [0 0 0.7] /N 1 >> << /FunctionType 2 /Domain [0.0 2.5697] /C0 [0 0 0.7] /C1 [0 0 0.5] /N 1 >> << /FunctionType 2 /Domain [0.0 2.5697] /C0 [0 0 0.5] /C1 [1 1 1] /N 1 >> ] /Bounds [ 0.797 1.59401 2.1918] /Encode [0 1 0 1 0 1 0 1] >> /Extend [true false] >> >> An Analysis of the Production Leader in the Stackelberg Model.pdf. 14 0 obj x��W�nGE��s�2�ު�;�,�A #��@%R����!ߛ�Y��R�&� Q��Z_���C-�ҵ��$,��Ce����%G?�� ��A�T]�w���_']t\��~Y���w��}��C=Z�,`�:��`�?�W�~�CG�*Y���5���_�[./��O3� 5Z���R��N�e /����"�z��>4��"Z�4]k��J�ƴ�~%߾6QD�ۊ�-��@�Z:�F[�J��7�hUE�onX\㾍Z�f�vJ��{wi?�j;) �B�&ك��6o�0D�ls��>g�*��ݣ���Ҏ.�����lIM; J5���$=�ڇ�"� 2�rDK�U2 /MediaBox [0 0 362.835 272.126] Oligopolist™s Choice Antoine Augustin Cournot (28/8/1801 Œ31/3/1877): the supply of spring water teacher of August Walras, father of Leon Walras, –rst to draw /Trans << /S /R >> This model applies where: (a) the firms sell homogeneous products, (b) competition is based on output, and (c) firms choose their output sequentially and not simultaneously. << Bertrand’s Duopoly Model 3. stream /Resources 23 0 R >> The Stackelberg model of oligopoly or Stackelberg dominant firm model is an important oligopoly model that was first formulated by Heinrich Freiherr von Stackelberg in 1934. x��Vێ7}��Уf�QE��T I[l/h71����=v���]g�K>��[r.��7�6Z"ϡ��Z Oligopoly OLIGOPOLY “OLOGOPOLY” Oligos – few, Polein – sell. << Augustin Cournot’s Model Oligopoly was made by the French economist Augustin Cournot in 1839. is model rests upon the following main assumptions: 1. << technology rst, has set up production plan rst, etc. Traditional oligopoly models predict that, under constant marginal costs, there will only be one market share (Cournot) or a single firm with a large market share and all others with the same market share (Stackelberg). While the first mover in a Stackelberg duopoly earns more than a Cournot duopolist, this is not necessarily true for m > 2. It is named after the German economist Heinrich Freiherr von Stackelberg who published Market Structure and Equilibrium (Marktform und Gleichgewicht) in 1934 which described the model.. James Friedman provides a thorough survey of oligopoly theory using numerical examples and careful verbal explanations to make the ideas clear and accessible. )�9����@��0�����`x�N�?5��")�����lH��O���� ��1�4ڴs�G?܂E�Т�]�C��ۯ f]��-f#���c�*;a����B���N�î�~� View OLIGOPOLY IMPRIMIR.pdf from MICRO II 29313 at Universitat Pompeu Fabra. I First-mover sets quantity rst, I Follower adapts optimally to this quantity (not in a situation of perfect competition, but of a monopoly) He showed that oligopoly prices were essentially indeterminate, oscillating between small and high levels (the so-called “ Edgeworth cycles ”). Abstract. 24.5 we also show Cournot equilibrium point c, where the two reaction curves meet. /ProcSet [ /PDF /Text ] Stackelberg Model of Duopoly Stackelberg’s Model of Duopoly also has to do with companies trying to decide how much of a homogeneous good to produce. Get PDF (357 KB) Abstract. A general model of oligopoly endogenizing Cournot, Bertrand, Stackelberg, and Allaz-Vila . << xڽ�KO�0���+��Y��k;~t�4TbZU��.PS�y�T�_ύ�P���":~(��>�� �'r�H���iE��Jx��rJ��З��|���_�b�_�f4�P֦ȭ}a ~��x6s��Y�^1��c 4B��X�s��tS�38a_�bU�բθV��N�Y�qdà�N����`�X@)�8(���������5��5�[]��ˌ�YW� #p�Dnt�^�u�2�T�U��ٯ��#uL��+ N'�i�.h�J ��O{Н/ڶ\17l^^�Ċc��Oٯ��MZ�R���8=m�P>'+j�p���u�D8�ȼfeߤ��vb�[����g��l��ެ�� �Ƈ�u�R=��}gcK��F�ҫI�1�m7�rc��$�vl>�}ȓ�GyJ�pB��y�[���4aL��ٯ(�J ���� The Algebra of the Stackelberg Model Since the follower reacts to the leader’s output, the follower’s output is determined by its reaction function The Stackelberg leader uses this reaction function to determine its profit maximizing output level, which simplifies to ( ) 1 2 2 2 1 2b 0.5 Q a c Q r Q − − = = b a c c Q 2 2 2 1 1 + − = /Filter /FlateDecode Cournot uses the example of mineral spring water, […] endobj /ColorSpace 3 0 R /Pattern 2 0 R /ExtGState 1 0 R $#�����Yҵ������� Generally in oligopoly competition, it is assumed that there are a fixed number of firms and no new entry; all firms produce homogenous product in a single period and have constant marginal cost c. In the Cournot model, firms choose the quantities to produce and prices adjusted along to clear the market. There are Two firms in the market, A and B 2. endstream x��U�n1}����TL��G >> (i) The Kinked Demand Curve Model: The Kinked demand curve model was developed by Paul Sweezy (1939). :��ȿ�(����\�K.���Á�ޑ����|��l��wy�}9���_1.���0:d�Aڇ�x�C��N���1)�?#�V>݊��$ܫ/�&�5�$ʎ���"�[e�Xm���i?���X+w�Vl�$T�w*�$/�A+��$��k��\Wۯ�`�䃼�.0� ��r���k����=Dmu���2kΛ�M6�wMK2o ���Dy:���B}੅{��:�˛R0�`��/������J���E��S���b,�/���E[�P�'=�l�����[���Λ�U���9T ��9o\���ҧ���ĨLd�ku��c�����Ø K�`��2��E�������f�z�u�9��s��8W��c�Gv�!d�}�^��!6�D�x��_�a�p۬6�M����>d(�Wy]���/ykL�C��������FP4j�:�����hM����f�ѮQ��S� ��ƒ�|d����i�ђw��sH>�4��pi���Dn�Uq;�ꂿ�8��� ar=K �)ά9�4?���f뺤a�H�%�;ML�iF�^,�B��S��S��V�����,��x]rh���zAƒG�凈\�O���Eb�)sJ�%6a� �Z�@�CD#*�N��&�S��d���C���P��l�+)�qvk��͚���'&���Bb��� �=��5I����V{k*���ؚ��m��^��%�x"�i1YT��ÜMΛ�l&W�M�!��endstream 1. endobj We compare an m-firm Cournot model with a hierarchical Stackelberg model where m Firms choose outputs sequentially. %���� 12 0 obj <> Industrial Organization-Matilde Machado Stackelberg Model 11 3.3. /Resources 12 0 R It is one of the three (Cournot, Bertrand; Stackelberg) models that are commonly discussed in introductory microeconomics courses. 22 0 obj endobj /Matrix [1 0 0 1 0 0] 15 0 obj >> Non- Collusive Oligopoly Models 1) Augustin Cournot’s Model 2) Bertrand’s Model 3) Edgeworth’s Model 4) Stackelberg,s Model 11. Cournot’s oligopoly model (1838) — A single good is produced by two firms (the industry is a “duopoly”). Chamberlin’s Small Group Model 4. Hirschman-Her–ndal Index Note that the HHI only measures market power under the assumptions of the Cournot model If the market involves di⁄erentiated products, then the HHI is a misleading measure. ^�*Z��7?��j����d�� %������A����c�)�V� *?����cD�G�i�dON�PGy�L�l��d�۶CE�T��� ��^�- 26 0 obj ADVERTISEMENTS: This model was developed by the German economist Heinrich von Stackelberg and is an extension of Cournot’s model. endobj /Length 15 The von Stackelberg Leader-Follower Model Heinrich von Stackelberg proposed a model of oligopoly in which one firm, a follower, takes the output of the other firm as given (a Cournot type oligopolist) and adjusts its output accordingly. The principal difierence between the Cournot model and the Stack-elberg model is that instead of moving simultaneously (as in the Cournot model) the flrms now move sequentially. ��l���}c��������3{4k^]��?�]�k/��s��Us��q/�S��:��Q�y ���9x��@�n-���RFe�3�V��x��=QP�ՖV��bpd� Sweezy’s Kinked Demand Model. 855 14 0 obj Market with few sellers (market power). /BBox [0 0 5.139 5.139] Z�΃�tB��[�axƫ��j�ll���*-PA��"}���e��!EE�q�.P�P������6J�,p�E���m����. x���P(�� �� Stackelberg: Dominant big rm and many small followers Similar idea: 2 Firms, Dominant rm has \ rst-mover advantage", I E.g. Stackelberg Model. Stackelberg duopoly, also called Stackelberg competition, is a model of imperfect competition based on a non-cooperative game. Both rms have the same unit production cost c = 30. (2) Price and Output Determination Under Non-Collusive Oligopoly: It will be explain with the help of kinked Demand Curve Model. stream Assume that rst Firm 1 moves and chooses q 1:In the second stage, after observing q 1;Firm 2 moves and chooses q 2: << The other firm, a leader, takes into account the adjustment which the follower firm will make. /FormType 1 Cournot’s Duopoly Model 2. /Subtype /Form ADVERTISEMENTS: List of oligopoly models: 1. >> 14.5 Stackelberg Oligopoly Model • General linear inverse demand function: p = a – bQ • Two firms have identical marginal costs, m • Firm 1 (American Airlines) is the Stackelberg leader and chooses output first • Firm 2 (United Airlines) is the follower and chooses output using best-response function << -\�n���8���1�(e#����+m�:�F=I�ݢU����c�����V�bD2�bElzb�̟���n�^M�b62����G)�>'��N=�]d�(�G����+8A��ۨ�_Z�'M����, << Strategic We assume that each firm incurs quadratic production-adjustment costs if it changes its output. According to him, the firms under oligopoly try to avoid any activity which could lead to price wars among them. ������W��|��S��rv����(א�4a@R�^@������n�|�e�i���{! Stackelberg Model ( ) ( ) 2 2 12 2 1 2 2 2 21 2 * 1 221 () FOC: 0 2 0 ( ) Cournot's reaction function 2 q Max P q q c q a b q q c q 15 0 obj 16 0 obj Stackelberg model is a leadership model that allows the firm dominant in the market to set its price first and subsequently, the follower firms optimize their production and price. Economics 405/505 Introduction to Game Theory Prof. Rui Zhao 9 Stackelberg Model of Oligopoly 9.1 Example Firm 1 and Firm 2 produce stream In 1925, Edgeworth invalidated both models. In this paper, we compare an n-firm Cournot model with a Stackelberg model, where n-firms choose outputs sequentially, in a stochastic demand environment with private information. endobj << /S /GoTo /D [11 0 R /Fit] >> A Stackelberg oligopoly is one in which one firm is a leader and other firms are followers. Please.consider a channel donation: https://www.paypal.com/cgi-bin/webscr?cmd=_donations&business=T2MPM6MSQ3UT8¤cy_code=USD&source=urlThis video … endobj Stackelberg model. j���I��rB�%h:&�;U�}+�pBں�qA��J�7�W����0�.�0���Β��e�\?�e] QW[�Ϻe���-�E���z):}ϙ��2g��^E����Gs�ep�Yx xt%��?L�|��+�1_����v��r�p�endstream /Type /Page Content uploaded by Catalin Angelo Ioan. /Contents 13 0 R Stackelberg Model of Duopoly Stackelberg Duopoly Suppose that two rms (Firm 1 and Firm 2) face an industry demand P = 150 Q where Q = q 1 + q 2 is the total industry output. >> >> ���Pa%�-�.K/P���KN&;����ڕ�8��}�\�����p��. The Stackelberg perfect revealing equilibrium (SPRE) expected total output, consumer surplus, and total surplus are lower while expected price and total profits are higher than the Cournot equilibrium ones. 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