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Endogenous Stackelberg leadership

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  • Damme, E.E.C. van

    (Tilburg University)

  • Hurkens, J.P.M.

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.

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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-154410.

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Date of creation: 1999
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Publication status: Published in Games and Economic Behavior (1999) v.28, p.105-129
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-154410

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Web page: http://www.tilburguniversity.edu/

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  1. Damme, E.E.C. van & Hurkens, S., 2004. "Endogenous price leadership," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-129320, Tilburg University.
  2. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262582384, December.
  3. A. Michael Spence, 1979. "Investment Strategy and Growth in a New Market," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 1-19, Spring.
  4. Fudenberg, Drew & Tirole, Jean, 1983. "Capital as a commitment: Strategic investment to deter mobility," Journal of Economic Theory, Elsevier, Elsevier, vol. 31(2), pages 227-250, December.
  5. Sadanand, V. & Green, E.J., 1991. "Firm Scale and the Endogenous Timing of Entry : A Choice Between Commitment and Flexibility," Working Papers, University of Guelph, Department of Economics and Finance 1991-11, University of Guelph, Department of Economics and Finance.
  6. Sadanand, Asha & Sadanand, Venkatraman, 1996. "Firm Scale and the Endogenous Timing of Entry: a Choice between Commitment and Flexibility," Journal of Economic Theory, Elsevier, Elsevier, vol. 70(2), pages 516-530, August.
  7. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers, Florida - College of Business Administration 88-4, Florida - College of Business Administration.
  8. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer.
  9. Sadanand, V. & Green, E.J., 1991. "Firm Scale and the Endogenous Timing of Entry : A Choice Between Commitment and Flexibility," Working Papers, University of Guelph, Department of Economics and Finance 1991-11, University of Guelph, Department of Economics and Finance.
  10. Ellingsen, Tore, 1995. "On flexibility in oligopoly," Economics Letters, Elsevier, Elsevier, vol. 48(1), pages 83-89, April.
  11. Saloner, Garth, 1987. "Cournot duopoly with two production periods," Journal of Economic Theory, Elsevier, Elsevier, vol. 42(1), pages 183-187, June.
  12. Pal, Debashis, 1991. "Cournot duopoly with two production periods and cost differentials," Journal of Economic Theory, Elsevier, Elsevier, vol. 55(2), pages 441-448, December.
  13. Mailath George J., 1993. "Endogenous Sequencing of Firm Decisions," Journal of Economic Theory, Elsevier, Elsevier, vol. 59(1), pages 169-182, February.
  14. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, Elsevier, vol. 36(8), pages 1601-1626, December.
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