Stackelberg's First-Mover Advantage | Microeconomics by Game Theory 101

gametheory101.com
Under Stackelberg competition, firms sequentially select their production quantities. Who has the advantage compared to Cournot competition? At first, it may seem that the answer could go either way. The follower benefits from seeing what the leader has done and choosing the best it can do in response. The leader has the benefit of credibly committing to a quantity and forcing the follower to react to it. Which effect dominates? This lecture shows that the leader, in fact, always outperforms the Cournot outcome.

[@iHazardGaming007]

Will the leader always produce greater quantity then the follower? Even if the follower has a lower MC than the leader?

[@Gametheory101]

If you pause at 2:35 and start plugging in values (make c_1 very high), you will see that the answer is no.

[@iHazardGaming007]

William Spaniel this might be a stupid question but what is a supposed to denote?

[@amaliarios78]

@@iHazardGaming007 I believe "a" represents the upper bound on price on the market; as quantity "q" increases, a - q decreases. Hope this helps

[@PunmasterSTP]

Another incredible lecture and demonstration; thanks for sharing! If I had to mention one thing, it would be that reminding us what the variables stand for in this video might be helpful. But overall I think it was still great.

[@revimfadli4666]

Interesting how opening information to your opponent gives an advantage

[@YellowCard1194]

hi, how do you simplify (a+c2)/2-c1 to (a-c)/2

[@Gametheory101]

Imagine that the players have the same marginal costs so that c_1 = c_2 = c, and then simpify.