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Entry in a Stackelberg perfect equilibrium


  • Arijit Mukherjee

    () (University of Nottingham, UK)


This paper considers welfare effects of entry when the incumbent firm behaves like a Stackelberg leader in the product market. In contrast to the existing literature, we show that entry may increase welfare for any cost asymmetries between the firms. Using a general demand function we show the condition for welfare improving entry.

Suggested Citation

  • Arijit Mukherjee, 2007. "Entry in a Stackelberg perfect equilibrium," Economics Bulletin, AccessEcon, vol. 12(33), pages 1-6.
  • Handle: RePEc:ebl:ecbull:eb-07l10028

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    References listed on IDEAS

    1. C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
    2. Kotaro Suzumura & Kazuharu Kiyono, 1987. "Entry Barriers and Economic Welfare," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 157-167.
    3. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    4. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    5. Stiglitz, Joseph E, 1981. "Potential Competition May Reduce Welfare," American Economic Review, American Economic Association, vol. 71(2), pages 184-189, May.
    6. Roger Clarke & David Collie, 2003. "Product differentiation and the gains from trade under Bertrand duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 658-673, August.
    7. Klemperer, Paul D, 1988. "Welfare Effects of Entry into Markets with Switching Costs," Journal of Industrial Economics, Wiley Blackwell, vol. 37(2), pages 159-165, December.
    8. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    9. van Damme, Eric & Hurkens, Sjaak, 1999. "Endogenous Stackelberg Leadership," Games and Economic Behavior, Elsevier, vol. 28(1), pages 105-129, July.
    10. Tandon, Pankaj, 1984. "Innovation, Market Structure, and Welfare," American Economic Review, American Economic Association, vol. 74(3), pages 394-403, June.
    11. Basu, Kaushik, 1995. "Stackelberg equilibrium in oligopoly: An explanation based on managerial incentives," Economics Letters, Elsevier, vol. 49(4), pages 459-464, October.
    12. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    13. Arghya Ghosh & Souresh Saha, 2007. "Excess Entry in the Absence of Scale Economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(3), pages 575-586, March.
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    More about this item


    Cournot competition Entry Stackelberg competition Welfare;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D3 - Microeconomics - - Distribution


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