Do followers really matter in Stackelberg competition?
AbstractIn this note, we consider a generalized T−stage Stackelberg oligopoly. We provide a proof and an interpretation that under the two necessary and sufficient conditions of linear aggregate demand and identical constant marginal costs, followers do not matter for leaders. Leaders act as rational myopic agents, voluntarily ignoring the number of followers and remaining stages, thereby behaving as Cournotian oligopolists. Strategies of incumbent firms are invariant to entry of new cohorts. Their profits can be studied by the way of two discount factors: the first impacting markup and the second impacting output supply. Some implications in terms of welfare and convergence toward competitive equilibrium are derived.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2011-10.
Length: 17 pages
Date of creation: 2011
Date of revision:
Leader’s markup discount factor; linear economy; follower’s output discount factor; myopic behavior;
Other versions of this item:
- Ludovic Julien & Olivier Musy & Aurélien Saïdi, 2011. "Do Followers Really Matter in Stackelberg Competition?," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 75, pages 11-27.
- Julien, Ludovic & Musy, Oliver & Saïdi, Aurélien, 2011. "Do Followers Really Matter in Stackelberg Competition?," REVISTA LECTURAS DE ECONOMÍA, UNIVERSIDAD DE ANTIOQUIA - CIE.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-26 (All new papers)
- NEP-COM-2011-03-26 (Industrial Competition)
- NEP-IND-2011-03-26 (Industrial Organization)
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.:
- John S. Heywood & Matthew McGinty, 2008. "Leading and Merging: Convex Costs, Stackelberg, and the Merger Paradox," Southern Economic Journal, Southern Economic Association, vol. 74(3), pages 879-893, January.
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- John S. Heywood & Matthew McGinty, 2007. "Mergers among leaders and mergers among followers," Economics Bulletin, AccessEcon, vol. 12(12), pages 1-7.
- Boyer, Marcel & Moreaux, Michel, 1986. "Perfect competition as the limit of a hierarchical market game," Economics Letters, Elsevier, vol. 22(2-3), pages 115-118.
- Ludovic Julien & Olivier Musy & Aurélien Saïdi, 2012. "On hierarchical competition in oligopoly," Journal of Economics, Springer, vol. 107(3), pages 217-237, November.
- Federico Etro, 2007.
"Stackelberg competition with endogenous entry,"
121, University of Milano-Bicocca, Department of Economics, revised 2007.
- Richard Watt, 2002. "A Generalized Oligopoly Model," Metroeconomica, Wiley Blackwell, vol. 53(1), pages 46-55, 02.
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