Showing papers on "Stackelberg competition published in 1996"
TL;DR: Concepts of memberships of optimalities and degrees of decision powers are proposed to solve the above problems efficiently and solve the hierarchy decision process paradox.
261 citations
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TL;DR: In this paper, the authors consider a 2-stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2, and they show that committing is more risky for the high cost firm and that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the low cost firm will choose to commit.
Abstract: We consider a linear quantity setting duopoly game and analyze which of the players will commit when both players have the possibility to do so. To that end, we study a 2-stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2. We show that committing is more risky for the high cost firm and that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the low cost firm will choose to commit. Hence, the low cost firm will emerge as the endogenous Stackelberg leader.
174 citations
TL;DR: Based on a method due to Molodtsov, new results to approximate weak Stackelberg problems by sequences of strong Stackelford problems by convergence of marginal functions and approximate solutions are given.
Abstract: We are concerned with weak Stackelberg problems such as those considered in [19], [23] and [25]. Based on a method due to Molodtsov, we present new results to approximate such problems by sequences of strong Stackelberg problems. Results related to convergence of marginal functions and approximate solutions are given. The case of data perturbations is also considered.
137 citations
TL;DR: In this paper, the authors present a model of stochastic oligopoly with demand uncertainty where firms endogenously choose entry timing and conclude that the behavior of a dominant firm with a finite fringe can be approximated by Stackelberg equilibrium.
87 citations
TL;DR: In this article, the authors apply techniques from the "new empirical industrial organization" literature to the competitive product line pricing decision, where a firm strategically prices its brands when determining the profit-maximizing conduct in the market.
Abstract: Researchers have recently developed models for determining which market conduct best describes observed data. We apply these techniques from the "new empirical industrial organization" literature to the competitive product line pricing decision, where a firm strategically prices its brands when determining the profit-maximizing conduct in the market. Demand, cost, and market structure are estimated endogenously. Empirical results from analyzing price competition in the laundry detergent market between Procter and Gamble selling Tide and EraPlus and Lever Brothers offering Wisk and Surf indicate that each firm positions its strong brand as a Stackelberg leader, with the rival's minor brand being the follower.
82 citations
TL;DR: This paper analyzed strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility, and predicted asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to enter the market.
Abstract: In this article I analyze strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility. The model predicts asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to enter the market. In equilibrium, one firm commits to early investment and the other firm follows a wait-and-see strategy. In the ex post outcome, firms end up with asymmetric sizes if the market profitability turns out close to, or lower than, expected; firms end up in symmetric position if the market turns out highly profitable. If uncertainty is small, the model yields (approximately) Stackelberg outcomes.
79 citations
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TL;DR: The authors analyzed strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility, and predicted asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to enter the market.
Abstract: In this article I analyze strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility. The model predicts asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to enter the market. In equilibrium, one firm commits to early investment and the other firm follows a wait-and-see strategy. In the ex post outcome, firms end up with asymmetric sizes if the market profitability turns out close to, or lower than, expected; firms end up in symmetric position if the market turns out highly profitable. If uncertainty is small, the model yields (approximately) Stackelberg outcomes.
77 citations
TL;DR: This paper showed that partial public ownership may be welfare-improving, if the public firm acts is Stackelberg leader and if the private firm's marginal cost is private information a simple transfer function is truth-eliciting.
Abstract: If a publicly-owned firm has a higher marginal cost than a private firm, partial public ownership may be welfare-improving, if the public firm acts is Stackelberg leader. If the private firm's marginal cost is private information a simple transfer function is truth-eliciting. If the stock market is efficient, the cost of renationalization is “small”.
69 citations
TL;DR: In this article, the authors present a model of environmental regulation in which the stringency of a firm's emissions standard is determined by cooperative bargaining between the firm and a regulator, and they show that bargaining can be socially beneficial because it can achieve the first-best outcome.
66 citations
01 Jan 1996
TL;DR: In this paper, the authors solve time-inconsistency in the cartel-versus-fringe model and provide the feedback von Stackelberg equilibrium for all cost congurations.
Abstract: In the seventies and eighties the theory of exhaustible natural resources developed a branch which was called the cartel-versus-fringe model to characterize markets with one large coherent cartel and a big number of small suppliers named the fringe. It was considered appropriate to use the von Stackelberg solution concept but because solutions could only be derived in an openloop framework timeinconsistency resulted. This paper solves time-inconsistency in the cartel-versus-fringe model and provides the feedback von Stackelberg equilibrium for all cost congurations.
63 citations
TL;DR: In this article, a symmetric duopoly with two production periods is considered, where the first period firms simultaneously choose initial production levels and then additional second period outputs are chosen simultaneously.
TL;DR: In this paper, the authors considered non-renewable resource extraction in a situation where the resource buyers have formed a government which applies emission taxation for slowing pollution accumulation and the sellers are competitive or a resource cartel.
TL;DR: The solutions in these models show how the final design out come can be predicted based on the different interactions that may occur between the decision makers in concurrent design project.
Abstract: One way to model concurrent decision making is to formulate multi player mathematical games The purpose of this paper is to illus trate a variety of concurrent decision-making models that arise in two simple applications where explicit models can be obtained to represent the typical stages of design and manufacturing in product development Of particular interest are bilevel formulations which have an interpretation of a Stackelberg game between two players such as Design and Manufacturing The solutions in these models show how the final design out come can be predicted based on the different interactions that may occur between the decision makers in concurrent design project
TL;DR: In this article, the authors show that there is a unique correlated equilibrium for the Cournot oligopoly model with linear demand and asymmetric, linear costs, which is the unique Nash equilibrium.
TL;DR: In this paper, the interaction between a regulator and polluting firms is modeled as a Stackelberg differential game in which the regulator leads, and the firms create pollution, which results in a stock extermality.
Abstract: I model the interaction between a regulator and polluting firms as a Stackelberg differential game in which the regulator leads. The firms create pollution, which results in a stock extermality. I analyze the intertemporal effects of alternate pollution control measures in a competitive industry. The principal issue here concerns the dynamic inconsistency of the optimal solution. Inter alia, I compare the steady state levels of pollution under optimal and under time consistent policies.
TL;DR: In this article, the optimal order policies for a firm facing random demand and random deal offerings were determined for a periodic review setting, where a firm may first place an order at the regular price later in the period, if a price promotion is offered by the supplier (with a certain probability), the firm may decide to place another order if the promotion is successful.
TL;DR: In this article, the authors model the interaction between a regulator and a monopolistic, polluting firm as a Stackelberg differential game in which the regulator leads and the firm creates pollution, which results in a stock externality.
Abstract: This paper continues a line of research begun in Batabyal (1995a). I model the interaction between a regulator and a monopolistic, polluting firm as a Stackelberg differential game in which the regulator leads. The firm creates pollution, which results in a stock externality. I analyze the intertemporal effects of alternate pollution control measures. The principal issue here concerns the dynamic inconsistency of the optimal solution. Inter alia, I compare the steady state levels of pollution under optimal and under dynamically consistent policies.
TL;DR: The Stackelberg price game is a viable static equilibrium construct even though the fringe firms are not atomistic as discussed by the authors, and the structural sufficiency conditions for selecting a unique leader based on the concept of Pareto dominance, in which the structural criterion involves the relative capacity shares of the first and second largest market rivals.
Abstract: States that the Stackelberg leadership model is rarely used to describe market price determination perhaps because of the lack of a theoretical basis for selecting the minimum size necessary for leadership. Provides structural sufficiency conditions for selecting a unique Stackelberg leader based on the concept of Pareto dominance, in which the structural criterion involves the relative capacity shares of the first and second largest market rivals. Suggests that the Stackelberg price game is a viable static equilibrium construct even though the fringe firms are not atomistic. Applies the Stackelberg model to antitrust merger analysis.
TL;DR: In this article, the main theories of rivalrous interaction among business firms and the problems of oligopoly and monopoly are discussed, as well as how Stackelberg used indifference curves to map the intersecting interests of rival sellers or buyers.
Abstract: Discusses Heinrich von Stackelberg as a mathematical economist, referring to his book Marktform und Gleichgewicht. Presents the main theories of rivalrous interaction among business firms and the problems of oligopoly and monopoly. Notes how Stackelberg used indifference curves to map the intersecting interests of rival sellers or buyers. Discusses Stackelberg’s isoprofit diagrams and the pattern of market interactions now called Stackelberg leadership.
TL;DR: This article showed that Stackelberg competition is not necessarily welfare-enhancing compared with Cournot competition in an entry-deterrence framework, and derived conditions under which in this framework Stackeberg competition leads to lower expected welfare, in the case where demand is linear.
Abstract: Proposes a model which shows that Stackelberg competition is not necessarily welfare‐ enhancing compared with Cournot competition. 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 entry‐deterrence framework, where post‐entry competition is Stackelberg rather than Cournot. Derives conditions under which in this framework Stackelberg competition leads to lower expected welfare, in the case where demand is linear.
TL;DR: In this article, the authors assess the place of Heinrich von Stackelberg in the history of ideas as reflected in the literature of economics and present a short section devoted to his views on state control.
Abstract: Assesses the place of Heinrich von Stackelberg in the history of ideas as reflected in the literature of economics. Uses evidence from three main sources: histories of economics, the periodical literature and doctoral dissertations to support the conclusion that Stackelberg already has an important and lasting place in the history of economic thought. Points out that the use of Stackelberg’s ideas and techniques is now as general and common as the use of those of Cournot, Walras, Pareto and Nash. Presents a short section devoted to his views on state control because these are so often misunderstood. Speculates on possible reasons why Stackelberg is not ranked more highly than he usually is.
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TL;DR: In this article, the scope of firm-union decentralized bargaining is shown to be endogenously determined in industries with market power, and it is shown that right-to-manage emerges, as a subgame perfect equilibrium bargaining institution, only if the union's bargaining power is sufficiently high.
Abstract: In this paper the scope of firm-union decentralized bargaining is shown to be endogenously determined in industries with market power. We consider a homogenous industry where firms compete in quantities. Efficient Bargains may only occur if both, the firm and its own union, unanimously agree to negotiate over employment as well as wages. Right-to-Manage bargaining takes place, if either the firm or its union choose to bargain only over wages, leaving employment decision at the firm's discretion. We show that Right-to-Manage emerges, as a subgame perfect equilibrium bargaining institution, only if the union's bargaining power is sufficiently high. If, however, the union's bargaining power is low enough, Efficient Bargains is always chosen by a subset of firm/union pairs. A firm/union pair prefers to conduct Efficient Bargains, because the firm can thus commit to a particulary quantity, and hence enjoy a sufficient portion ofthe Stackelberg leader's profits in the product market.
TL;DR: In this paper, the authors present a mathematical analysis of Stackelberg's price theory of oligopoly and conclude that in a dynamic game a Nash-Cournot equilibrium will emerge.
Abstract: Goes back to thinking on the price theory of oligopoly in 1960. In particular, is concerned with Stackelberg’s oligopoly theory. Presents a careful description of the development of Stackelberg’s analysis. Takes into account his mathematical appendix. Confronts the theory with game theory and concludes that in a dynamic game a Nash‐Cournot equilibrium will emerge.
TL;DR: In this paper, the authors examine the circumstances under which the pursuit of unilateral environmental policy by a country in a Stackelberg game, will make that country worse off and study the effects of environmental regulation by means of alternate price control instruments.
Abstract: In this paper we study some aspects of the question of international environmental regulation from a game theoretic perspective. We address two broad questions. First, we examine the circumstances under which the pursuit of unilateral environmental policy by a country in a Stackelberg game, will make that country worse off. Second, we study the effects of environmental regulation by means of alternate price control instruments in a Stackelberg game when there is transboundary pollution. We find that there are plausible theoretical circumstances in which the pursuit of unilateral environmental policy is not a good idea. Further, we show that in choosing between alternate pollution control instruments, national governments typically face a tradeoff between instruments which correct more distortions but are costly to implement and instruments which correct fewer distortions but are less costly to implement. In particular, we obtain a dominance result for a tariff policy; this result favors the use of tariffs from an informational standpoint alone.
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TL;DR: In this paper, the authors solve time-inconsistency in the cartel-versus-fringe model and provide the feedback von Stackelberg equilibrium for all cost configurations.
Abstract: In the seventies and eighties, the theory of exhaustible natural resources developed a branch, which was called the cartel-versus-fringe model, to characterize markets with one large coherent cartel and a big number of small suppliers named the fringe.It was considered appropriate to use the von Stackelberg solution concept but because solutions could only be derived in an open-loop framework time-inconsistency resulted.This paper solves time-inconsistency in the cartel-versus-fringe model and provides the feedback von Stackelberg equilibrium for all cost configurations.
TL;DR: Study of game-theoretic approaches for concurrent decision-making in engineering systems when well-defined, quantitative models are available to represent the different stages in the product life-cycle finds solutions which show that the unique Pareto solution coincides with the Stackelberg strategy when Design is the leader.
Abstract: In this paper, the objective is to study game-theoretic approaches for concurrent decision-making in engineering systems when well-defined, quantitative models are available to represent the different stages in the product life-cycle. The design and operation of a single-point metal cutting tool is used as an illustrative case-study and explicit models are developed for the design and operation stages of the life-cycle of the tool. Monotonicities in these two models have been evaluated symbolically and numerically. leading to the deduction of active constraints and the convenient computation of the rational reaction sets of the two players. Cooperative (Pareto). non-cooperative (Nash) and leader-follower (Stackelberg) solutions are obtained which show that the unique Pareto solution coincides with the Stackelberg strategy when Design is the leader but this is not necessarily the case when Manufacturing is the leader.
TL;DR: A software release policy which is based on the Stackelberg strategy solution concept and it is shown that an optimal strategy pair exists, and the relative leadership property of the optimal strategies is explored.
Abstract: We present a software release policy which is based on the Stackelberg strategy solution concept. The model formulated assumes the existence of two type of producers in the market, the leader and follower. The resulting release policy combines both cost factors and a loss of opportunity factor which is the result of competition between the rival producers. We define a Stackelberg strategy pair in the context of our model and, through a series of preliminary results, show that an optimal strategy pair exists. We also present a numerical example which utilizes a software reliability growth model based on the nonhomogeneous Poisson process. Finally, we explore the relative leadership property of the optimal strategies.
01 Jan 1996
TL;DR: A new algorithm based on the Frank-Wolf e method and neural network method is presented, based on a static Stackelberg game, for a class of bilevel decision-making problems.
Abstract: In this paper a model for a class of bilevel decision-making problems is presented in the form of a static Stackelberg game. Under certain convexity assumptions,some properties of the model is studied. According to these properties, this paper presents a new algorithm based on the Frank-Wolf e method and neural network method. An example demonstrates the feasibility of the proposed algorithm.
TL;DR: The work of Heinrich von Stackelberg while he was based in Spain from 1943 as discussed by the authors was key to the quantum leap in Spanish economic policy, abandoning utilitarian historicism which had permeated it up to then.
Abstract: Provides an overview of the evolution of Spanish economic policy throughout the nineteenth century and considers the economic thought of the Spanish professor of this time. Discusses the work of Heinrich von Stackelberg while he was based in Spain from 1943. Suggests that Stackelberg’s ideas were key to the quantum leap in Spanish economic policy, abandoning utilitarian historicism which had permeated it up to then.
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TL;DR: In this article, the authors model debt stabilization in the EU as a differential game between fiscal authorities and the European Central Bank, and derive the dynamics of the fiscal deficits, inflation and government debt in a monetary union.
Abstract: The replacement of national currencies by a common currency in the EMU causes a monetary externality if the European Central Bank is inclined to monetize part of outstanding government debt in the community.High government debt in one part of the EU then increases the common inflation rate.We model debt stabilization in the EU as a differential game between fiscal authorities and the ECB.Three different equilibria are considered: the Nash open-loop equilibrium, the Stackelberg open-loop equilibrium with the ECB leading and the Stackelberg open-loop equilibrium with the fiscal authorities leading.Dynamics of the fiscal deficits, inflation and government debt in a monetary union are derived and compared with an EU with national monetary policies.