Stackelberg and Cournot competition under equilibrium limit pricing

Abstract

Proposes a model which shows that Stackelberg competition is not necessarily welfare‐ enhancing compared with Cournot competition. Shows that, although in a simple duopoly model prices in a Stackelberg equilibrium are lower than in a Cournot equilibrium, this is not necessarily true in an entry‐deterrence framework, where post‐entry competition is Stackelberg rather than Cournot. Derives conditions under which in this framework Stackelberg competition leads to lower expected welfare, in the case where demand is linear.

Citation

Haan, M. and Maks, H. (1996), "Stackelberg and Cournot competition under equilibrium limit pricing", Journal of Economic Studies, Vol. 23 No. 5/6, pp. 110-127. https://doi.org/10.1108/01443589610154090