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Do Followers Really Matter in Stackelberg Competition?

Author

Listed:
  • Ludovic Julien

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Oliver Musy

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Aurélien Saïdi

    (ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay, IDHES - Institutions et Dynamiques Historiques de l'Économie et de la Société - UP1 - Université Paris 1 Panthéon-Sorbonne - UP8 - Université Paris 8 - UPN - Université Paris Nanterre - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay)

Abstract

In this paper, we consider a T-stage linear model of Stackelberg oligopoly. First, we show geometrically and analytically that under the two conditions of linear market demand and identical constant marginal costs, the T-stage Stackelberg model reduces to a model where T oligopolies exploit residual demand sequentially. At any stage, leaders behave as if followers did not matter. Second, we study social welfare and convergence toward competitive equilibrium. Especially, we consider the velocity of convergence as the number of firms increases. The convergence is faster when reallocating firms from the most to the less populated cohort until equalizing the size of all cohorts.

Suggested Citation

  • Ludovic Julien & Oliver Musy & Aurélien Saïdi, 2012. "Do Followers Really Matter in Stackelberg Competition?," Post-Print hal-05758776, HAL.
    • Handle: RePEc:hal:journl:hal-05758776
    DOI: 10.17533/udea.le.n75a11474
    as

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