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A stackelberg duopoly with binary choices of objectives

Author

Listed:
  • Athanasia Mavrommati

    (Department of Economics, University of Crete)

Abstract

This paper analyzes a Stackelberg model where firms choose their objective functions (profit or revenue) in order to achieve maximum payoff. The objective of the present work is to demonstrate that depending on the unit cost of production, firms make either asymmetric choices of objectives (low values of the unit cost) or symmetric choices (high values of the unit cost). As a result of these choices, the payoff advantage alternates between the first and the second mover in the market.

Suggested Citation

  • Athanasia Mavrommati, 2012. "A stackelberg duopoly with binary choices of objectives," Economics Bulletin, AccessEcon, vol. 32(1), pages 843-853.
    • Handle: RePEc:ebl:ecbull:eb-11-00243
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P79.pdf
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    References listed on IDEAS

    as
    1. Gorecki, Paul K., 1986. "The importance of being first : The case of prescription drugs in Canada," International Journal of Industrial Organization, Elsevier, vol. 4(4), pages 371-395, December.
    2. Vardy, Felix, 2004. "The value of commitment in Stackelberg games with observation costs," Games and Economic Behavior, Elsevier, vol. 49(2), pages 374-400, November.
    3. Michael Kopel & Clemens Löffler, 2008. "Commitment, first-mover-, and second-mover advantage," Journal of Economics, Springer, vol. 94(2), pages 143-166, July.
    4. Gary L. Lilien & Eunsang Yoon, 1990. "The Timing of Competitive Market Entry: An Exploratory Study of New Industrial Products," Management Science, INFORMS, vol. 36(5), pages 568-585, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Yi-Ling Cheng & Hai-Han Kao, 2019. "Product quality and endogenous firm objectives," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 813-830, October.

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    More about this item

    Keywords

    endogenous objectives; revenue objective; profit objective; first-mover advantage; second-mover advantage.;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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