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Endogenous Stackelberg leadership. (English) Zbl 0938.91011
Summary: The authors 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, they study a two-stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2. They show that committing is more risky for the high cost firm and that, consequently, risk dominance considerations, as in J. C. Harsanyi and R. Selten [A general theory of equilibrium selection in games. Cambridge, MA: MIT Press (1988; Zbl 0693.90098)], 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.

91A20 Multistage and repeated games
91B52 Special types of economic equilibria
Full Text: DOI
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