Consider a homogeneous Stackelberg leader-follower duopoly with quantity competition, in which both firms face the same industry-wide marginal costs. This paper investigates the comparative static effects of a change in these marginal costs. We show that an increase of the costs will lead to a decrease of the total market output. However, it turns out that the output of the leader firm might increase. We present conditions under which the latter counterintuitive effect occurs.
|Number of pages||7|
|Journal||Jahrbucher fur nationalokonomie und statistik|
|Publication status||Published - Sep-2000|
- Stackelberg duopoly
- cost change
- COMPARATIVE STATICS