Stackelberg Independence

Hinnosaar, Toomas

doi:10.1111/joie.12244

Stackelberg Independence

Hinnosaar, Toomas

Authors

TOOMAS HINNOSAAR TOOMAS.HINNOSAAR@NOTTINGHAM.AC.UK
Associate Professor

Abstract

The standard model of sequential capacity choices is the Stackelberg quantity leadership model with linear demand. I show that under the standard assumptions, leaders' actions are informative about market conditions and independent of lead-ers' beliefs about the arrivals of followers. However, this Stackelberg independence property relies on all standard assumptions being satisfied. It fails to hold whenever the demand function is non-linear, marginal cost is not constant, goods are differentiated, firms are non-identical, or there are any externalities. I show that small deviations from the linear demand assumption may make the leaders' choices completely uninformative.

Citation

Hinnosaar, T. (2021). Stackelberg Independence. Journal of Industrial Economics, 69(1), 214-238. https://doi.org/10.1111/joie.12244

Journal Article Type	Article
Acceptance Date	Jun 11, 2020
Online Publication Date	Jul 17, 2020
Publication Date	2021-03
Deposit Date	Jun 24, 2020
Publicly Available Date	Jul 18, 2021
Journal	Journal of Industrial Economics
Print ISSN	0022-1821
Publisher	Wiley
Peer Reviewed	Peer Reviewed
Volume	69
Issue	1
Pages	214-238
DOI	https://doi.org/10.1111/joie.12244
Keywords	sequential games; oligopolies; Stackelberg leadership model
Public URL	https://nottingham-repository.worktribe.com/output/4706198
Publisher URL	https://onlinelibrary.wiley.com/doi/full/10.1111/joie.12244