Stackelberg competition

About: Stackelberg competition is a research topic. Over the lifetime, 6611 publications have been published within this topic receiving 109213 citations.

Capacity, Output, and Sequential Entry

Abstract: Two crucial assumptions frequently made in industrial organization are that an established firm deters entry either by a constant high output (the Sylos Postulate) or by high excess capacity (the Excess Capacity Hypothesis). These assumptions may be an accurate description of the observed conduct of firms in some industries. However, when the rules of the post-entry game are clearly specified, the optimal output and investment strategies of an established firm may depart considerably from these behavioral assumptions. Because of this possible inconsistency with rational behavior, any conclusions about the formation of industry based upon either assumption are highly suspect. What is more, these assumptions avoid the main issue of whether entry deterrence is worthwhile at all. This paper presents a dynamic model of entry in which established firms pursue a Cournot Nash (alternatively Stackelberg) strategy toward a potential entrant. The entrant behaves in Cournot-Nash fashion and chooses output on the basis of expected postentry profits at the equilibrium of the post-entry game. Within this framework, a constant output entry-deterring strategy would involve maintenance of an entry-deterring output level before and after entry is threatened. An excess capacity entry-deterring strategy would involve holding excess capacity at an entry-deterring level and increasing output to that level after entry is threatened. Special conditions are presented under which the Sylos Postulate or the Excess Capacity Hypothesis will accurately describe optimal entry-deterring strategies. In addition, special conditions are examined under which the established firm maintains a constant output or holds pre-entry excess capacity when large-scale entry does in fact take place. The analysis shows that in general, established firm reactions to entry are quite different from these special cases. The Sylos Postulate (see Joseph Bain; Paolo Sylos-Labini; Franco Modigliani, 1958) asserts not only that potential entrants expect established firms to maintain their output constant as entry occurs, but that established firms keep output constant at a level that deters entry whether or not it is profitable to do so. Hailed as a "welcome major breakthrough on the oligopoly front" (Modigliani, 1958) the Sylos Postulate underlies many papers in the large theoretical and empirical literature on limit pricing.' Yet the Sylos Postulate ignores both the strategic interaction between firms and the dynamic aspects of entry.2 Unless the established firm's monopoly output exceeds the entrydeterring level, the established firm with a general cost function able to choose an entry-deterring output level will instead always desire a lower output level before entry. For the special case where capacity is an upper bound on output and the established firm is a Stackelberg leader in the post-entry game,

Cooperative advertising, pricing strategy and firm performance in the e-marketing age

Abstract: Cooperative advertising plays a strategically important role in marketing programs. In this paper, we use a game theoretical model to study not only cooperative advertising but also pricing strategy in a manufacturer—e-retailer supply chain with the consideration of product categories. First, two cooperative advertising models (the leader-follower Stackelberg and the strategic alliance) are established and analyzed. We then compare the two models to develop some important theories and managerial insights. Furthermore, we utilize a bargaining model to implement profit sharing and determine the manufacturer’s participation rate for cooperative advertising in the channel coordination of strategic alliance. Based on our results, we derive optimal market strategies and identify probable paths of future research.

Estimation of econometric models of some discrete games.

Abstract: SUMMARY This paper discusses, estimates and compares some microeconometric models for simultaneous discrete endogenous variables. The models are based on the assumption that observed endogenous variables represent the outcome of a static discrete game. I discuss models based on non-cooperative equilibrium concepts (Nash, Stackelberg), as well as models which presume Pareto optimality of observed outcomes. The models are estimated using data on the joint labor force participation decisions of husbands and wives in a sample of Dutch households.

Closed-loop Stackelberg solution to a multistage linear-quadratic game

Abstract: A new solution of a two-person, nonzero-sum Stackelberg game, with linear dynamics, quadratic performance criteion, and closed-loop information available to both players, is presented. This solution is applicable to all problems where the leader is able to influence the objective function of the follower, and this function is strictly convex with respect to the control variable handled by the follower. The resulting equilibrium strategies adapt to the possible nonoptimal behavior of players at some stages of the game. The strategy of the leader has a simple interpretation of a threat formulated by the leader toward the follower and, if necessary, carried out one stage after the follower has played inconsistently with the leader's wishes.