Answer to Question #109307 in Microeconomics for Shweta

Question #109307



2) Can the leader ever get a lower profit in a Stackelberg equilibrium than he would get in the Cournot equilibrium?


1
Expert's answer
2020-04-13T09:40:05-0400

Yes the leader will get lower profit in a Stackelberg equilibrium. This is because he is the first mover, he will concentrate in maximizing the total level of output which leads to creation of surplus hence decreases the price of the product compared with Cournot equilibrium which firms choose quantities simultaneously and independently, and industry output determines price through demand. 


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