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On the first mover advantage in Stackelberg quantity games

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  • Kurt Annen

    (University of Guelph)

Abstract

In economic models, “sales equals production” is typically treated as an identity and not as an equilibrium outcome. This distinction, however, matters when production is sequential because of off-equilibrium path behavior. This paper shows that the first mover advantage in the standard Stackelberg oligopoly game in quantities may be reduced when “sales equals production” is no longer treated as an identity. Moving first does not per se produce a strategic advantage. It is only first moves that are sufficiently costly that produce this advantage. With costless production, the advantage disappears completely and the Cournot–Nash outcome is obtained.

Suggested Citation

  • Kurt Annen, 2019. "On the first mover advantage in Stackelberg quantity games," Journal of Economics, Springer, vol. 126(3), pages 249-258, April.
    • Handle: RePEc:kap:jeczfn:v:126:y:2019:i:3:d:10.1007_s00712-018-0622-4
    DOI: 10.1007/s00712-018-0622-4
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    References listed on IDEAS

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    Cited by:

    1. Richard J. Arend, 2022. "Breaking Cournot: The Effects of Capacity-Adjusting Technology," JRFM, MDPI, vol. 15(9), pages 1-11, August.

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    More about this item

    Keywords

    Oligopoly; Stackelberg competition; Sales versus production;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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