Stackelberg Leadership
In the same market as the Cournot duopoly (price P = 120 − Q, zero costs), Firm 1 commits to its quantity first and Firm 2 observes it before choosing its own. In the subgame perfect equilibrium, what quantity does the leader (Firm 1) produce?
Related problems & prerequisites
Worth solving first
- Cournot Duopoly 3.0/10
- The Firm That Stays Out 3.0/10
Source: Heinrich von Stackelberg, 'Marktform und Gleichgewicht' (1934). Statement written for AxiomIQ.