10 0 obj /Matrix [1 0 0 1 0 0] 24.5 we also show Cournot equilibrium point c, where the two reaction curves meet. %PDF-1.4 Both rms have the same unit production cost c = 30. /D [11 0 R /XYZ 9.909 273.126 null] /Contents 13 0 R Therefore, it has occupied an impor­tant place in economic theory as a reference model or as a starting point of explaining the behaviour of individual firms under oligopolistic market structure. Content uploaded by Catalin Angelo Ioan. $#�����Yҵ������� /Resources 12 0 R M�h�kg��%��Zk,�V�1ǀ���S@)�YR�ˈ��V"�%��a��2bj^hV�%��=���QO��\�pOpk�~��Q͡w�|�N��O�Ɂ��EN�þeC�-J���>�F���CI�q�M�l��. >> >> /Length 436 The Stackelberg model of oligopoly or Stackelberg dominant firm model is an important oligopoly model that was first formulated by Heinrich Freiherr von Stackelberg in 1934. /Resources 23 0 R /BBox [0 0 5.139 5.139] endobj endobj endobj Economics 405/505 Introduction to Game Theory Prof. Rui Zhao 9 Stackelberg Model of Oligopoly 9.1 Example Firm 1 and Firm 2 produce %PDF-1.5 << <> %�쏢 The Stackelberg perfect revealing equilibrium (SPRE) expected total output, consumer surplus, and total surplus are lower while expected price and total profits are higher than the Cournot equilibrium ones. stream — If the firms’ total output is = 1 + 2 then the market price is if … Patrick Bajari Econ 4631 Oligopoly Models 29 / 55. Cournot’s oligopoly model (1838) — A single good is produced by two firms (the industry is a “duopoly”). Author content. x��W�nGE��s�2�ު�;�,�A #��@%R����!ߛ�Y��R�&� Q��Z_���C-�ҵ��$,��Ce����%G?�� ��A�T]�w���_']t\��~Y���w��}��C=Z�,`�:��`�?�W�~�CG�*Y���5���_�[./��O3� 5Z���R��N�e /����"�z��>4��"Z�4]k��J�ƴ�~%߾6QD�ۊ�-��@�Z:�F[�J��7�hUE�onX\㾍Z�f�vJ��{wi?�j;) �B�&ك��6o�0D�ls��>g�*��ݣ���Ҏ.�����lIM; J5���$=�ڇ�"� 2�rDK�U2 We compare an n-firm Cournot model with a Stackelberg model, where n-firms choose outputs sequentially, in a stochastic demand environment with private information.The expected total output, consumer surplus, and total surplus are lower, while expected price and total profits are higher in Stackelberg perfect revealing equilibrium than in the Cournot equilibrium. While the Cournot model is one of simultaneous quantity setting, the Stackelberg model a quantity leadership model. :��ȿ�(����\�K.���Á�ޑ����|��l��wy�}9���_1.���0:d�Aڇ�x�C��N���1)�?#�V>݊��$ܫ/�&�5�$ʎ���"�[e�Xm���i?���X+w�Vl�$T�w*�$/�A+��$��k��\Wۯ�`�䃼�.0� ��r���k����=Dmu���2kΛ�M6�wMK2o ���Dy:���B}੅{��:�˛R0�`��/������J���E��S���b,�/���E[�P�'=�l�����[���Λ�U���9T ��9o\���ҧ���ĨLd�ku��c�����Ø K�`��2��E�������f�z�u�9��s��8W��c�Gv�!d�}�^��!6�D�x��_�a�p۬6�M����>d(�Wy]���/ykL�C��������FP4j�:�����hM����f�ѮQ��S� ��ƒ�|d����i�ђw��sH>�4��pi���Dn�Uq;�ꂿ�8��� ar=K �)ά9�4?���f뺤a�H�%�;ML�iF�^,�B��S��S��V�����,��x]rh���zAƒG�凈\�O���Eb�)sJ�%6a� �Z�@�CD#*�N��&�S��d���C���P��l�+)�qvk��͚���'&���Bb��� �=��5I����V{k*���ؚ��m��^��%�x"�i1YT��ÜMΛ�l&W�M�!��endstream endobj 3 Industrial Organization- Matilde Machado Stackelberg Model 5 3.3. This recognition allows the sophisticated duopolist to determine the reaction curve of his rival […] In spite of the extensive works done on problems of the Cournot (or Cournot-type) oligopoly models, dynamic analysis of’duopoly model formulated by H.von Stackelberg(1934) has almost been outside the scope of concern of economists. 7 Finally, in 1934, Von Stackelberg found the equilibrium price to be superior to marginal costs, but below the Cournot equilibrium. Cournot uses the example of mineral spring water, […] View OLIGOPOLY IMPRIMIR.pdf from MICRO II 29313 at Universitat Pompeu Fabra. ^�*Z��7?��j����d�� %������A����c�)�V� *?����cD�G�i�dON�PGy�L�l��d�۶CE�T��� ��^�- /Filter /FlateDecode 855 Comparison with Cournot Model: In Fig. 14 0 obj /Filter /FlateDecode I First-mover sets quantity rst, I Follower adapts optimally to this quantity (not in a situation of perfect competition, but of a monopoly) Cournot’s Duopoly Model: Cournot founded the theory of duopoly. 11 0 obj Traditional oligopoly models predict that, under constant marginal costs, there will only be one market share (Cournot) or a single firm with a large market share and all others with the same market share (Stackelberg). In this paper, we compare an n-firm Cournot model with a Stackelberg model, where n-firms choose outputs sequentially, in a stochastic demand environment with private information. 13 0 obj << technology rst, has set up production plan rst, etc. endstream ADVERTISEMENTS: List of oligopoly models: 1. The principal difierence between the Cournot model and the Stack-elberg model is that instead of moving simultaneously (as in the Cournot model) the flrms now move sequentially. ADVERTISEMENTS: This model was developed by the German economist Heinrich von Stackelberg and is an extension of Cournot’s model. It was formulated by Heinrich Von Stackelberg in 1934. There are Two firms in the market, A and B 2. << x��U�n1}����TL��G endobj /Subtype /Form We assume that each firm incurs quadratic production-adjustment costs if it changes its output. Abstract. 16 0 obj A general model of oligopoly endogenizing Cournot, Bertrand, Stackelberg, and Allaz-Vila . Stackelberg’s Duopoly 5. /ProcSet [ /PDF ] /ProcSet [ /PDF /Text ] >> /Type /Page This paper analyzes a T-stage model of oligopoly where firms build up capacity and conclude forward sales in stages t�{��!�w���bk��߭'� �i endobj endobj j���I��rB�%h:&�;U�}+�pBں�qA��J�7�W����0�.�0���Β��e�\?�e] QW[�Ϻe���-�E���z):}ϙ��2g��^E����Gs�ep�Yx xt%��?L�|��+�1_����v��r�p�endstream endstream endobj Stackelberg Model Graphically(cont): q2 q’ q’’qM q1 Isoprofit = πM =1 single point π’< πM=(1/b)((a-c)/2)^2 Given q2, firm 1 chooses its best response i.e. 14 0 obj 22 0 obj << He showed that oligopoly prices were essentially indeterminate, oscillating between small and high levels (the so-called “ Edgeworth cycles ”). stream G �mG+U��Q- E�!r��V̡�SpL�l~��Da�����\�7���D�� ﲵiY�ȵ�r!�$2�dYp�-n~?�E}�\o�r;eÑ�@i������1�zj2y[�Vv.���{�Z|���̗-��4whU$~�Q��ٜ*s�U�)���"y�>;˦CF�-�fz^p�y@t3˾��+�_��C����e����vv@��]ϛ�T�r�Mv��l�8����͒l��Ͼ��[�D�q��M:�D������'�eA��F��K�]�V�Z5q'�?�R��Ȟ��U:�ڿ�++�ǡ6�ܸ}�7S[�[:-����[��k�%W��c�!�i��8%O�����$9�S������(��L,�p��Oы�H�e$�Ò$w����k,OW&��H-tgL��:+6)c A1JӤN4���%"���O쏌R����0$�|-���wc03\Zg�eK�w%Dy3ىX�J�gl&Gr��޷�%���g/�q4���s8O�|ݖx���R������d,��}eӨ�1��Y8NJǧ��C��Ce� , by von Stackelberg, that one duopolist is sufficiently sophisticated to recognise that his competitor on! % �-�.K/P���KN & ; ����ڕ�8�� } �\�����p�� is one of simultaneous quantity setting, the firms oligopoly. 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