The difference between Cournot and Stackelberg equilibrium is that Cournot equilibrium is chosen in a way that each firm maximizes their profit. We implement both a random matching and a ï¬xed-pairs version for each market. Stackelberg Model Differences between Cournot and Stackelberg: In Cournot, firm 1 chooses its quantity given the quantity of firm 2 In Stackelberg, firm 1 chooses its quantity given the reaction curve of firm 2 Note: the assumption that the leader cannot revise its decision i.e. We compare an m-firm Cournot model with a hierarchical Stackelberg model where m Firms choose outputs sequentially. Under the assumption that R&D spillovers only flow from the R&D leader to the R&D follower, a duopoly StackelbergâCournot game with heterogeneous expectations is considered in this paper. Stackelberg is one firms chosing price or quanity before other. In other words, Cournot equilibrium is when firms choose sequential, and Stackelberg is when firms choose equilibrium simultaneously. International oil market works this way: OPEC says how much they will produce, and let London and New York exchanges fight over who can pay more for it. STACKELBERG BEATS COURNOT: ON COLLUSION AND EFFICIENCY IN EXPERIMENTAL MARKETS Steffen Huck, Wieland Mu¨ller and Hans-Theo Normann We report on an experiment designed to compare Stackelberg and Cournot duopoly markets with quantity competition. Proposes a model which shows that Stackelberg competition is not necessarily welfareâ enhancing compared with Cournot competition. The Stackelberg equilibrium price is lower, so output and total surplus are higher; total profits are lower. 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 entryâdeterrence framework, where postâentry competition is Stackelberg rather than Cournot. Many works studied on complex dynamics of Cournot or Stackelberg games, but few references discussed a dynamic game model combined with the Cournot game phase and Stackelberg game phase. It is assumed, by von Stackelberg, that one duopolist is sufficiently sophisticated to recognise that his competitor acts on the Cournot assumption. In Stackelberg equilibrium, only one firm maximizes their profits. Understanding the Stackelberg Graphically. Market Demand Is Given By P(Q) = 200 â Q Where As Usual Q = 91 +92. While the Cournot model is one of simultaneous quantity setting, the Stackelberg model a quantity leadership model. Similarly, the follower in the Stackelberg model produces less output than that in the Cournot model. This recognition allows the sophisticated duopolist to determine the reaction curve of his rival [â¦] Abstract. ADVERTISEMENTS: This model was developed by the German economist Heinrich von Stackelberg and is an extension of Cournotâs model. You decide on quantity and the market (typically and organized exchange) determine the price. Industrial Organization-Matilde Machado Stackelberg Model 15 3.3. 24.5 we also show Cournot equilibrium point c, where the two reaction curves meet. Comparison with Cournot Model: In Fig. E.g. Stackelberg equilibrium is attained if and only if firm 1 desires to be a leader and firm 2 a follower. We compare an n-firm Cournot model with a Stackelberg model, where n-firms choose outputs sequentially, in a stochastic demand environment with private information.The expected total output, consumer surplus, and total surplus are lower, while expected price and total profits are higher in Stackelberg perfect revealing equilibrium than in the Cournot equilibrium. 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