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Stackelberg Leadership in a Dynamic Duopoly with Capital Accumulation

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  • L. Lambertini

Abstract

I propose a dynamic duopoly model where firms enter simultaneously but compete hierarchically la Stackelberg at each instant over time. They accumulate capacity through costly investment, as in Solow s (1956) growth model. The leader invests more than the followers as a result, in steady state the leader s capacity and profits are larger than the follower`s. Therefore, the present analysis does not confirm Gibrat`s Law, since the individual growth rate is determined by the timing of moves.

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  • L. Lambertini, 2002. "Stackelberg Leadership in a Dynamic Duopoly with Capital Accumulation," Working Papers 442, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:442
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