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An economic theory of leader choice in Stackelberg models

Richard S. Higgins (Capital Economics, 1299 Pennsylvania Avenue, NW, Washington DC)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 1 December 1996


States that the Stackelberg leadership model is rarely used to describe market price determination perhaps because of the lack of a theoretical basis for selecting the minimum size necessary for leadership. Provides structural sufficiency conditions for selecting a unique Stackelberg leader based on the concept of Pareto dominance, in which the structural criterion involves the relative capacity shares of the first and second largest market rivals. Suggests that the Stackelberg price game is a viable static equilibrium construct even though the fringe firms are not atomistic. Applies the Stackelberg model to antitrust merger analysis.



Higgins, R.S. (1996), "An economic theory of leader choice in Stackelberg models", Journal of Economic Studies, Vol. 23 No. 5/6, pp. 79-95.




Copyright © 1996, MCB UP Limited