Two firms compete in a Stackelberg fashion. If firm 2 is the leader, then:
A) firm 1 views the output of firm 2 as given.
B) firm 2 views the output of firm 1 as given.
C) Both firm 1 views the output of firm 2 as given and firm 2 views the output of firm 1 as given are correct.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

In a Stackelberg competition, the leader (firm 2) commits to an output level first, and the follower (firm 1) then chooses its output level based on the leader's decision. Thus, firm 1 views the output of firm 2 as given.

Two Firms Compete in a Stackelberg Fashion