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When do first-movers have an advantage? A Stackelberg classroom experiment

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  • Robert Rebelein
  • Evsen Turkay

Abstract

The timing of moves can dramatically affect firm profits and market outcomes. When firms choose output quantities, there is a first-mover advantage, and when firms choose prices, there is a second-mover advantage. Students often find it difficult to understand the differences between these two situations. This classroom experiment simulates each scenario in a way that makes it easy for students to understand the theoretical reasons for the different possible outcomes. The authors have developed a two-firm classroom experiment where students first play a Stackelberg game in which firms sequentially choose production quantities and then a Stackelberg game in which firms sequentially choose prices. When choosing quantities, it is advantageous to move first, and when choosing prices, it is advantageous to wait.

Suggested Citation

  • Robert Rebelein & Evsen Turkay, 2016. "When do first-movers have an advantage? A Stackelberg classroom experiment," The Journal of Economic Education, Taylor & Francis Journals, vol. 47(3), pages 226-240, July.
    • Handle: RePEc:taf:jeduce:v:47:y:2016:i:3:p:226-240
    DOI: 10.1080/00220485.2016.1179144
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    References listed on IDEAS

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    Cited by:

    1. Neligh, Nathaniel, 2020. "Vying for dominance: An experiment in dynamic network formation," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 719-739.

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