On the effects of an industry-wide cost change in a Stackelberg duopoly

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Abstract

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.

Original languageEnglish
Pages (from-to)592-598
Number of pages7
JournalJahrbucher fur nationalokonomie und statistik
Volume220
Issue number5
Publication statusPublished - Sep-2000

Keywords

  • Stackelberg duopoly
  • cost change
  • COMPARATIVE STATICS
  • OLIGOPOLY

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