A dynamic Stackelberg model with production-adjustment costs

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Abstract

We investigate the (dynamic) stability of a Stackelberg oligopoly model of a market of a homogeneous good, with output competition, one Stackelberg leader and a number of identical followers. We assume that each firm incurs quadratic production-adjustment costs if it changes its output. We present a simple necessary and sufficient condition for stability of the model. Using the condition, we compare the stability of this model with the stability of two related Cournot models in which all firms present are followers. It turns out that the Stackelberg model is "more stable" than these two Cournot models.

Original languageEnglish
Pages (from-to)271-282
Number of pages12
JournalJournal of Economics
Volume66
Issue number3
Publication statusPublished - 1997

Keywords

  • Stackelberg model
  • dynamic oligopoly
  • stability
  • STABILITY

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