Endogenous Stackelberg Leadership

E.E.C. van Damme, J.P.M. Hurkens

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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.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages33
Volume1996-115
Publication statusPublished - 1996

Publication series

NameCentER Discussion Paper
Volume1996-115

Keywords

  • game theory
  • duopoly

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    van Damme, E. E. C., & Hurkens, J. P. M. (1996). Endogenous Stackelberg Leadership. (CentER Discussion Paper; Vol. 1996-115). Microeconomics.