How to Solve A Stackelberg Oligopoly Problem

[@DanTheStripe]

My online microeconomics lecturer is abysmal. These videos are helping me understand stuff massively. Thank you!

[@MH-lz7zy]

More than i would ever learn in class.. Thanks so much!

[@Ravenuscze]

+lol m2k explained in 5mins :D

[@stijnservaes]

Thanks man. I'm currently in my first semester at university and these simple examples makes studying for exams so easy

[@alitanman26]

How has life been after graduation?

[@XinShu.]

time flies by so quickly , i am also in the first semester in university ,wish 3 years later i can give you my life answer ,but surely , i think i will head to the master degree...@@alitanman26

[@jonathangoodrich3177]

This has been more helpful than a 2 hour lecture on this topic! Thanks so much

[@keithsankar1229]

THANK YOU!! I have my exam tomorrow, and I can without a doubt say, I learnt more from your channel in 30 mins than I ever did during any two hour lecture.

[@R_to_the_L]

My term 1 MBA exams are tomorrow and here I am, thankyou so much

[@aeconomm]

God bless you and your children :D 4:35 "nananana..."

[@FlyingMonkey085]

Great, accessible explanation! Helped with last minute studying for my intermediate microeconomics final. Many thanks!

[@jree93]

how did you get from p=70-1/2 q1 to MR1=70-q1?

[@EconomicsinManyLessons]

Firm 1's inverse demand is P = 70 - 0.5q1. Firm 1's total revenue, TR = P x q1, TR = (70 - 0.5q1)q1 Multiply through by q1 gives TR = 70q1 -0.5q1^2 Take derivative to get: MR = dTR/dq1 = 70 - 2(0.5)q1 = 70 - q1. A short-cut method: given an inverse demand given by P = a - bq, the marginal revenue equation will be the same as the price equation but with a slope that is twice as steep: MR = a - 2bq.

[@wontkillbe]

1sportingclays THIS IS WHAT I NEEDED TO SEE!!! THANK YOU!!

[@PrashantKumar-vz1ke]

1sportingclays thanks

[@figerzysims2641]

thanks so much!

[@Mr99lior]

Dealing with Monopoly (The first mover works as a monopoly at that stage), in that shape of equation, u simply multiply *2 the q coefficient.

[@SuryanshGupta-x2t]

11 years later, still helpful!

[@JuztoKik]

I just wanted to say thank you so much, this was way more useful than the stuff in class very easy and straight forward!

[@samihabintetariq9214]

Thank you for saving me before my exam 🙏🙏

[@EconomicsinManyLessons]

You are welcome!

[@konstantinosapostolou6783]

thank you so much!!!!!!!!!!!!!it is an exceptional video! i have nothing understood through my university's lessons, Yours sincerely Konstantinos S.Apostolopoulos/DMS,MBA NTU

[@yogesramsurrun3366]

Hello mate, Thank you for making me understand the stackelberg model. I have a small question, How did you derive MR = 70 - q1, from P=70-1/2q1? Please help, Many Thanks,

[@EconomicsinManyLessons]

Yoges Ramsurrun Let me explain it two ways. First, MR is exactly like the inverse demand equation but with a slope that is twice as steep. So if P = a- bQ, MR = a - 2bQ. In the video P = 70 - 0.5Q, so MR = 70 - 2(0.50)Q, which equals 70 - Q. Second, a firm's revenue (R) = price times quantity, or R = PQ. substitute the inverse demand equation into revenue equation to get: R = (70 - 0.5Q)Q = 70Q - 0.5Q^2. Take the derivative of the revenue function (R = 70Q - 0.5Q^2) to get MR, which gives MR = 70 - Q.

[@yingyang9482]

@@EconomicsinManyLessons thank you

[@scottagon]

A quick tip, If you have already solved the same equation for a Cournot equilibrium, the Stackleburg solution will just be, the (Cournot equilibrium)x(3/4) For Example q2=(Cournot EQ)*(3/4) q1=q2*2 In the context of this series... q2=20*(3/4) q2=15 q1=15*2 q1=30

[@tomvoss3373]

What I needed :)) Easy to understand and brief ! Thank you !

[@EconomicsinManyLessons]

You are welcome!

[@erisos2]

Very easy to understand, thank you for the explanation.

[@OG-ke5xi]

Thank you so much! Only decent video on Stackelberg I found so far.

[@behnantelli5692]

This is very benefit a video. Thank you so much 🙏🙏🙏

[@michaobara1237]

Thank you, it help me a lot, I passed my exam with 89% :)

[@Staphylezz]

Thank you so much! This was very helpful before my final exam.

[@xyttra]

OMG what did you do to the kid between pause ^^ I laughed there ^^ Great video though thanks.

[@argunaman7845]

this helped a lot with a trivial matter thanks a lot sir

[@sekehfootstats6818]

Thank you for the understandable tutorials. Both the cournot and this one

[@Yumi-wi5ix]

𝑞1 = 720 − 2𝑝1 + 𝑝2 𝑞2 = 720 − 2𝑝2 + 𝑝1 Compute each firm’s output at the subgame perfect equilibrium of the sequential game when firm 1 is the leader, and the firms compete on quantity. How to do this question please???

[@kumarrohit2222]

There are two firms whose market demand is :Q=3200-1600P. Their costs are - Firm1 :TC1 =0.25q1 and Firm2 : TC2 =0.5q2 . Firm1 is leader whike firm2 is follower , solve for stackleberg output levels ,market price and profit levels of the firms. I'm not able to get the answer, please help me out .

[@NatesLegend]

Thank you for the explanation. I am going through looking for easy videos for Cournot, Betrand, Sweezy and Stackleberg. Also, sounds like someone is reaching out from the beyond at the 2:10. The ghost of Stackleberg.

[@Lettaface]

Shouldn't the reaction function from Firm 2 be substituted into the profit function of Firm 1, instead of the revenue function? Since the problem faced by Firm 1 is to optimise profit and not revenue.

[@EconomicsinManyLessons]

Firm 1 profit = TR (Q1, Q2) - TC (Q1). You can substitute into either the revenue or profit function...you get the same result either way because firm 2's output is only part of the revenue function of firm 1.

[@tomaco0341]

hi there when you differenciate p to mr in respect to q1 would the 70 not disappear and the mr=-q1???

[@maxwellankomah4893]

Well appreciated but the TC was not specified either for Q1 or Q2 so differentiating it to get MC which is equal to c and equal to MR at equilibrium is not understandable to me. 🙏🙏

[@mistry0203]

but what if the firms face 2 different MC, the example im trying to complete changes the MC of one firm from when the reaction functions were worked out.

[@lottieonice]

If you have two cost functions (one for each firm), which one do you differentiate to get MC? Or do you combine them to get TC and then differentiate? Great video thanks!

[@EconomicsinManyLessons]

You will differentiate both cost functions to get the MC of firm 1 and MC of firm 2. You will set the MR of firm 1 (Stackelberg leader) equal to firm 1's MC. When deriving firm 2's reaction function (as shown in my Cournot video), you should set firm 2's MR equal to firm 2's MC.

[@SteezyJam]

How do you calculate the profit? I mean I know its the Stackelberg price times the Monopoly quantity subtracted by the cost etc. But why is the monopoly quantity used not the Stackelberg quantity to get profit?

[@simulationworld5872]

why the reaction function value is not included while calculating marginal cost, since q2 is also a function of q1 therefore Marginal cost should be 20. Please reply ASAP thanks

[@saurabhdas4291]

I have a problem like this.where i need to find the Stackelberg market equilibrium. Market demand is Q=3200-1600p where Q=Q1+Q2 and the cost function of two firms 1(the leader) and 2 (the follower) are: TC1(Q1)= 0.25Q1 and TC2= 0.5Q2. Will you please solve this for me.I will be helpful to you..

[@ronnakronkitipacharadechat1710]

thanks for this video it helped me pass the test

[@cesar9dit]

How did you made the partial derivation of IT=70P-1/2(q1)(P) shouldn´t it be Img=70+1/2(q1) ??? Thank you for your answer. (Great job by the way! Helps a lot!)

[@cesar9dit]

sorry the Img should read as follows: Img=70-1/2(q1)

[@cesar9dit]

symbolab.com/solver/partial-derivative-calculator/%5Cfrac%7Bd%7D%7Bdp%7D(70p-%5Cfrac%7B1%7D%7B2%7Dqp)

[@LD-xo2cy]

César Alfonso García Valdés You multiply Pxq1 to get TR, then find the partial derivative of TR/q1. It should look like this instead. symbolab.com/solver/partial-derivative-calculator/%5Cfrac%7Bd%7D%7Bdq%7D(70q-%5Cfrac%7B1%7D%7B2%7Dqq). Cheers.

[@haninadhirahazman5122]

thank you!! i managed to answer my quiz problems~

[@oluwafemihassan5060]

What if firm 2 is the mover and firm 1 is to follow? I suggest you make a video of a solution of such situation with different cost structures. Thank you

[@EconomicsinManyLessons]

Here's a video with different cost structures: kzbin.info/www/bejne/jl7Vo4lvhtiId9E

[@AlamedanBreezyRep]

I can't thank you enough for this, brilliantly articulated. My math is terrible but you have ensured I'll do good in my Micro exam....gana graduate :D

[@BlackDeath12345]

AlamedanBreezyRep me too :) is ur major econ as well?

[@matinajazmine]

Am getting P=0 and q2 as 0 is that normal?

[@enverburtul1908]

no

[@gabe75001]

What's weird is my firm 2's output was also half of firm 1's output? Why is this happening

[@EconomicsinManyLessons]

This is a feature of the model whenever both firms have the same marginal cost.

[@gabe75001]

@@EconomicsinManyLessons Awesome, thanks for still replying!

[@Non-disjunction]

I wish my dad was an econ master

[@ezaldeenabbas3246]

Thanks a lot, this was helpful !!

[@saharebrahimibajgani2776]

Can you please make an example of multi leader followers game؟

[@timothyperego8129]

your explanation is amazing...on point...thanks hey

[@lokwangcheung6724]

what if firm 2 has a fixed cost to enter the market? will it change its MC?

[@rimshakhan1333]

Same question 🙋

[@shyruti]

If MC of the firms are 0. Then is Cournot and Stackelberg solution the same? Mine is coming the same. Just confirming

[@EconomicsinManyLessons]

In Cournot, assuming each firm has the same marginal cost (or MC = 0 for both firms), each firm will produce the same quantity of output. In Stakelberg, with the same conditions, the Stackleberg leader will produce twice as much output as the other firm. Try this video: kzbin.info/www/bejne/o5nWY3aaYtBrq9E

[@MK-gb3rw]

Can you please explain how differentiating 70-1/2 Q1 makes 70-Q1

[@tomaco0341]

have you figured it out yet???\

[@K3lalachibi]

Top dad

[@mandingoduagi5283]

Thank you, very useful content!

[@RachelLin3]

Good explanations :) Thank you

[@Sandeep-gt7rp]

hello sir how did p=70-(1/2)q1 become MR=70-q1

[@EconomicsinManyLessons]

Please see my commemt to Jerry Yu's post. For a simple explanation, MR will equal the inverse demand with a slope that is twice as steep.

[@duaali1169]

What is the basically difference between cournot and stackelberg?? It's actually seems same ..! Is it?

[@EconomicsinManyLessons]

Cournot firms set their output at the same time. In Stackelberg, one firm sets it output first, the other firm then responds by setting its output.

[@duaali1169]

@@EconomicsinManyLessons thank you so much sir..! Tomorrow is my exam..!and Am so much confused...!! But m clear in stackelberg and cournot..! For this ! Thanks to you 😊

[@chuanlueng4515]

Thank you very much!!! good explanation.

[@eff700]

thanks man, very useful

[@jmm09015]

how did you get MR = 70 - q1 from P = 70 - (0.5)q1 ?

[@EconomicsinManyLessons]

Firm 1's inverse demand is P = 70 - 0.5q1. Firm 1's total revenue, TR = P x q1, TR = (70 - 0.5q1)q1 Multiply through by q1 gives TR = 70q1 -0.5q1^2 Take derivative to get: MR = dTR/dq1 = 70 - 2(0.5)q1 = 70 - q1.

[@Gerb0527]

Thank you so much, it helps a lot.

[@zifengzhu680]

How can you get Q2=30-1/2Q1 ?

[@EconomicsinManyLessons]

TR2 = (100 - q1 - q2)q2 = 100q2 - q1q2 - q2^2. The partial derivative of TR2 with respect to q2 is MR2 = 100 - q1 - 2q2. Set MR2 = MC2 to get 100- q1 -2q2 = 40. Solve for q2 = 30 -1/2q1.

[@KelvinReiChannel]

thank you it was extremely helpful

[@rochellebenjamin3061]

Thanks, Understood clearly

[@Lirajek]

thanks, great help for the upcoming test (:

[@aryansharma8813]

How MC got equal to 40 as we were differentiating it with respect to q1 but TC= 40Q not 40q1

[@EconomicsinManyLessons]

Total cost for firm 1 is TC = 49q1, the derivative is 40. Do a similar thing for firm 2, writing TC = 40q2.

[@AlomgirkabirPolash]

Very helpful. thanks 😊

[@ABlueberryMuffin]

the only problem now is I have fixed cost as well and I am not sure what to do with that :/

[@EconomicsinManyLessons]

The presence of fixed cost will not affect marginal cost. Fixed cost is just a constant, and the derivative of a constant is zero. If this video used fixed cost like TC = 40Q + 200, the answers would be unchanged.

[@damilojuoyekan7571]

Don't know if you can help with a simple "problem" on stackelberg.

[@thapeloseliane1907]

thanks very much. That helped

[@nelsonbassole5937]

Thanks Guys really helpfull.

[@shuqizhang5793]

you video saved my ass, thx

[@EconomicsinManyLessons]

I am glad to hear that!

[@comic90210]

Bless your soul.

[@stalinov91]

You are a god. My savior.

[@lewismichaelwaite7780]

Thank you so much!

[@bukarorolo]

really good!!

[@pauldupuis5724]

THANK YOU!!!!!!

[@kapamagicman]

Nice one

[@rinkusah3938]

Thank u so muchhh

[@simphiwesibongiseni375]

Great Stuff but MR1 = Q1

[@claytillman2227]

THANK YOU

[@peacego624]

thanks

[@EconomicsinManyLessons]

You are welcome!

[@malekmk5676]

i don't know how can i thanks you

[@taraxx2150]

this must be absolute bs, if i calculate it the way u do with my example its totally wrong

[@duferadashura6926]

INTRESTING

[@sleevynicks165]

MY MAN!

[@stnaderviek]

Not bad！

[@emmanuelniyodusenga758]

❤

[@toniettaxoxo]

verheerend nicke

[@toniettaxoxo]

veeeeery nice ??

[@Haassan1]

Set speed to 1,25x. Jeez dis dude is slow.

[@ggz7651]

THANK YOU