Tuesday, May 14, 2013
Asymmetric welfare implication between a small number of leaders and a small number of followers in Stackelberg models
Posted by D. Daniel Sokol
Hiroaki Ino (School of Economics, Kwansei Gakuin University) and Toshihiro Matsumura (Institute of Social Science, the University of Tokyo) have written on Asymmetric welfare implication between a small number of leaders and a small number of followers in Stackelberg models.
ABSTRACT: We investigate a Stackelberg oligopoly model in which m leaders and N-m followers compete. We find an asymmetric welfare implication of the Stackelberg model. Introducing a small number of leaders into the Cournot model can reduce welfare. However, introducing a small number of followers into the Cournot model always improves welfare. The key result behind this asymmetry is contrasting limit results in the cases where m → 0 and m → N. We also discuss the optimal number of leaders and the integer constraint for the number of the firms.