IDEAS home Printed from https://ideas.repec.org/a/bit/bsrysr/v5y2014i1p68-76.html
   My bibliography  Save this article

Stackelberg Equilibrium of the Client and the Producer of Embedded Software

Author

Listed:
  • Vrankić Ilko

    (Faculty of Economics and Business, University of Zagreb, Croatia)

  • Bach Mirjana Pejić

    (Faculty of Economics and Business, University of Zagreb, Croatia)

  • Krpan Mira

    (Faculty of Economics and Business, University of Zagreb, Croatia)

Abstract

Background: Our research assumes that the software quality affects the product validity. This assumption also refers to embedded software. Objectives: This paper analyses the Stackelberg equilibrium in which the consumer is the leader and the producer of embedded software is the follower. Methods/Approach: A comparative statics analysis of a producer's reaction is carried out and confirms our intuition that the product price is positively correlated to the number of employees and the software quality. Results: An increase in wage has an adverse effect on producer’s reaction. Derived results are illustrated numerically and Stackelberg and cooperative equilibrium are compared. It is shown that the welfare loss is smaller with higher quality software for any number of employees. Conclusions: Although the equilibrium involves less employed workers, the optimal software quality is higher. The optimal product price is lower, which puts the consumer and the producer in a better position

Suggested Citation

  • Vrankić Ilko & Bach Mirjana Pejić & Krpan Mira, 2014. "Stackelberg Equilibrium of the Client and the Producer of Embedded Software," Business Systems Research, Sciendo, vol. 5(1), pages 68-76, March.
    • Handle: RePEc:bit:bsrysr:v:5:y:2014:i:1:p:68-76
    DOI: 10.2478/bsrj-2014-0006
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/bsrj-2014-0006
    Download Restriction: no
    File URL: https://libkey.io/10.2478/bsrj-2014-0006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, April.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oishi Takayuki, 2010. "Collusive Behavior of Bidders in English Auctions: A Cooperative Game Theoretic Analysis," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-15, April.
    2. J. C. R. Alcantud & Carlos Alós-Ferrer, 2002. "Choice-Nash Equilibria," Vienna Economics Papers vie0209, University of Vienna, Department of Economics.
    3. Felix J. Bierbrauer & Pierre C. Boyer, 2016. "Efficiency, Welfare, and Political Competition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(1), pages 461-518.
    4. Bandyopadhyay, Siddhartha, 2013. "Market thickness, prices and honesty: A quality demand trap," Mathematical Social Sciences, Elsevier, vol. 65(1), pages 52-59.
    5. Battigalli, Pierpaolo & Leonetti, Paolo & Maccheroni, Fabio, 2020. "Behavioral equivalence of extensive game structures," Games and Economic Behavior, Elsevier, vol. 121(C), pages 533-547.
    6. Tobias Harks & Max Klimm & Rolf Möhring, 2013. "Strong equilibria in games with the lexicographical improvement property," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 461-482, May.
    7. Thijssen, J.J.J., 2003. "Investment under uncertainty, market evolution and coalition spillovers in a game theoretic perspective," Other publications TiSEM 672073a6-492e-4621-8d4a-0, Tilburg University, School of Economics and Management.
    8. Isabel Amigo & Pablo Belzarena & Sandrine Vaton, 2013. "A pricing scheme for QoS in overlay networks based on first-price auctions and reimbursement," Netnomics, Springer, vol. 14(1), pages 69-93, November.
    9. Daley, Brendan & Sadowski, Philipp, 2017. "Magical thinking: A representation result," Theoretical Economics, Econometric Society, vol. 12(2), May.
    10. Agnieszka Rusinowska & Harrie Swart, 2008. "Negotiating a Stable Government: An Application of Bargaining Theory to a Coalition Formation Model," Group Decision and Negotiation, Springer, vol. 17(5), pages 445-464, September.
    11. Horaguchi, Haruo, 1996. "The role of information processing cost as the foundation of bounded rationality in game theory," Economics Letters, Elsevier, vol. 51(3), pages 287-294, June.
    12. Albert Banal-Estañol & Inés Macho-Stadler, 2007. "Financial Incentives in Academia: Research versus Development," Working Papers 295, Barcelona School of Economics.
    13. Carlos Pimienta, 2011. "Weakly-Bayesian and Consistent Assessments," Discussion Papers 2012-02, School of Economics, The University of New South Wales.
    14. Saša Zorc & Ilia Tsetlin, 2020. "Deadlines, Offer Timing, and the Search for Alternatives," Operations Research, INFORMS, vol. 68(3), pages 927-948, May.
    15. , & ,, 2013. "Implementation of communication equilibria by correlated cheap talk: The two-player case," Theoretical Economics, Econometric Society, vol. 8(1), January.
    16. Albers, Leif, 2017. "Feasible Beliefs in Noncooperative Games," Center for Mathematical Economics Working Papers 352, Center for Mathematical Economics, Bielefeld University.
    17. Mu'alem, Ahuva & Schapira, Michael, 2018. "Setting lower bounds on truthfulness," Games and Economic Behavior, Elsevier, vol. 110(C), pages 174-193.
    18. Giacomo Bonanno, 2016. "Exploring the Gap between Perfect Bayesian Equilibrium and Sequential Equilibrium," Games, MDPI, Open Access Journal, vol. 7(4), pages 1-23, November.
    19. Inohara, Takehiro, 2023. "Similarities, differences, and preservation of efficiencies, with application to attitude analysis, within the Graph Model for Conflict Resolution," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1330-1348.
    20. Huiye Ma & Nicole Ronald & Theo Arentze & Harry Timmermans, 2013. "Negotiating on location, timing, duration, and participant in agent-mediated joint activity-travel scheduling," Journal of Geographical Systems, Springer, vol. 15(4), pages 427-451, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bit:bsrysr:v:5:y:2014:i:1:p:68-76. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.