Intermediate Microeconomics · free preview
Stackelberg Leadership
When one firm commits to quantity first, it chooses the point on the rival's best response maximizing its own profit, leader 44 and follower 22 at price 34, the leader earning the monopoly-level 968 while the follower takes 484, first-mover advantage from commitment alone.
1. The leader's problem
The leader's problem
2. Why commitment pays
Why commitment pays
3. Comparing the structures
Comparing the structures
4. Leadership's price
Leadership's price
5. The leader's optimum
What quantity does the Stackelberg leader choose, and why?
6. The resulting outcome
What are the follower's quantity, total output, and price?
7. The commitment requirement
Why is mere announcement of 44 not enough for leadership?
8. The profit comparison
How do Stackelberg profits compare across roles and to Cournot?
9. The follower's response
Compute the follower best response to a leader quantity of 44, half of 88 minus 44, and write the number.
10. The leader's profit
Compute the leader's profit, price 34 minus MC 12 times 44, and write the number.
11. The follower's lot
What profit does the Stackelberg follower earn at quantity 22 and price 34?
12. The ratio of roles
Leader profit is 968, follower profit 484. What is the ratio?
13. The structures' prices
How does the Stackelberg price of 34 compare with the Cournot price of about 41.33?
14. The leader's residual
After the leader commits to 44, what demand does the follower face?
15. The follower's profit
Compute the follower's profit as price 34 minus MC 12 times quantity 22, and write the number.
16. Total Stackelberg output
Compute total output as leader 44 plus follower 22, and write the number.
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