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Asymmetric welfare implication between a small number of leaders and a small number of followers in Stackelberg models

  • Hiroaki Ino

    ()

    (School of Economics, Kwansei Gakuin University)

  • Toshihiro Matsumura

    ()

    (Institute of Social Science, the University of Tokyo)

We investigate a Stackelberg oligopoly model in which m leaders and N-m followers compete. We find an asymmetric welfare implication of the Stackelberg model. Introducing a small number of leaders into the Cournot model can reduce welfare. However, introducing a small number of followers into the Cournot model always improves welfare. The key result behind this asymmetry is contrasting limit results in the cases where m → 0 and m → N. We also discuss the optimal number of leaders and the integer constraint for the number of the firms.

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Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 098.

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Length: 19 pages
Date of creation: Jan 2013
Date of revision: Jan 2013
Handle: RePEc:kgu:wpaper:098
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  1. Sajal Lahiri & Yoshiyasu Ono, 2003. "Export-Oriented Foreign Direct Investment and Local Content Requirement," Pacific Economic Review, Wiley Blackwell, vol. 8(1), pages 1-14, 01.
  2. Junichiro Ishida & Toshihiro Matsumura & Noriaki Matsushima, 2011. "Market Competition, R&D And Firm Profits In Asymmetric Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 59(3), pages 484-505, 09.
  3. Matsumura, Toshihiro, 1999. "Quantity-setting oligopoly with endogenous sequencing," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 289-296, February.
  4. Lahiri, Sajal & Ono, Yoshiyasu, 1998. "Foreign Direct Investment, Local Content Requirement, and Profit Taxation," Economic Journal, Royal Economic Society, vol. 108(447), pages 444-57, March.
  5. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
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