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Do followers really matter in Stackelberg competition?

Author

Listed:
  • Ludovic A. Julien
  • Olivier Musy
  • Aurélien W. Saïdi

Abstract

In this note, we consider a generalized T−stage Stackelberg oligopoly. We provide a proof and an interpretation that under the two necessary and sufficient conditions of linear aggregate demand and identical constant marginal costs, followers do not matter for leaders. Leaders act as rational myopic agents, voluntarily ignoring the number of followers and remaining stages, thereby behaving as Cournotian oligopolists. Strategies of incumbent firms are invariant to entry of new cohorts. Their profits can be studied by the way of two discount factors: the first impacting markup and the second impacting output supply. Some implications in terms of welfare and convergence toward competitive equilibrium are derived.

Suggested Citation

  • Ludovic A. Julien & Olivier Musy & Aurélien W. Saïdi, 2011. "Do followers really matter in Stackelberg competition?," EconomiX Working Papers 2011-10, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2011-10
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    Cited by:

    1. Toomas Hinnosaar, 2021. "Stackelberg Independence," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 214-238, March.

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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