In a Stackelberg game, a monopolist could deter entry from a potential rival by
A)telling the potential rival not to enter.
B)strategically moving first.
C)moving to a Bertrand model.
D)None of the above.

Question

Quizplus · Accepted Answer

In a Stackelberg game, the market leader (the monopolist) moves first and sets their output or price, while the follower (the potential rival) observes the leader's action and responds with their own output or price. By moving first, the monopolist can strategically set their output or price in a way that deters the potential rival from entering the market. This can be achieved by setting a price low enough that it would make it unprofitable for the potential rival to enter, or by setting output levels high enough that it would saturate the market and leave no room for the potential rival to enter. Telling the potential rival not to enter or moving to a Bertrand model are not effective ways to deter entry in a Stackelberg game.

In a Stackelberg Game, a Monopolist Could Deter Entry from a Potential