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Stackelberg leadership with demand uncertainty

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Author Info
Zhiyong Liu (Kellogg School of Management, Northwestern University, USA)
Abstract

We consider a simple Stackelberg model with demand uncertainty only for the first mover in order to compare the advantages of leadership and flexibility, and use an example to provide some discussion about the endogenous order of moves in the presence of demand uncertainty. We find that only when the realized demand is in an intermediate zone does the first mover preserve its advantage; when the realized demand is far from its expected value, the second mover obtains higher profit than the leading firm, as the leadership advantage is dominated by the benefit of flexibility when demand fluctuation is significant. Even with this risk of losing flexibility under significant demand variation, for some parameter values in our model the first firm still has incentive to choose Stackelberg rather than Cournot competition. Copyright © 2005 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1226
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 26 (2005)
Issue (Month): 5 ()
Pages: 345-350
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:26:y:2005:i:5:p:345-350

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Midori Hirokawa & Dan Sasaki, 2001. "Endogenously Asynchronous Entries into an Uncertain Industry," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 10(3), pages 435-461, 09. [Downloadable!] (restricted)
  2. Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
  3. Pal, Debashis, 1991. "Cournot duopoly with two production periods and cost differentials," Journal of Economic Theory, Elsevier, vol. 55(2), pages 441-448, December. [Downloadable!] (restricted)
  4. Gal-Or, Esther, 1987. "First Mover Disadvantages with Private Information," Review of Economic Studies, Blackwell Publishing, vol. 54(2), pages 279-92, April. [Downloadable!] (restricted)
  5. Huck, Steffen & Konrad, Kai A. & Muller, Wieland, 2001. "Big fish eat small fish: on merger in Stackelberg markets," Economics Letters, Elsevier, vol. 73(2), pages 213-217, November. [Downloadable!] (restricted)
  6. Hirokawa, Midori & Sasaki, Dan, 2001. "Strategic Choice of Quantity Stickiness and Stackelberg Leadership," Bulletin of Economic Research, Blackwell Publishing, vol. 53(1), pages 19-34, January.
  7. Heidrun C. Hoppe & Ulrich Lehmann-Grube, 2001. "Second-Mover Advantages in Dynamic Quality Competition," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 10(3), pages 419-433, 09. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Michael Kopel & Clemens Löffler, 2008. "Commitment, first-mover-, and second-mover advantage," Journal of Economics, Springer, vol. 94(2), pages 143-166, July. [Downloadable!] (restricted)
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