Do Followers Really Matter in Stackelberg Competition?
DOI:
https://doi.org/10.17533/udea.le.n75a11474Keywords:
leader's markup discount ratio, linear economy, follower's output index, generalized Stackelberg competitionAbstract
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.
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