According to the Stackelberg duopoly model, if both firms in the industry face identical demands and identical total production costs, then:
A) The Stackelberg leader will produce more than the Stackelberg follower.
B) The Stackelberg follower will produce more than the Stackelberg leader.
C) The Stackelberg leader and Stackelberg follower will produce identical output.
D) The outcome is identical with that predicted by the Cournot model.

Question

Quizplus · Accepted Answer

In the Stackelberg duopoly model, the firm that acts as the leader commits to an output level first, and the follower firm then decides its output level knowing the leader's decision. The leader, anticipating the follower's response, will choose an output level that maximizes its own profit given this dynamic. As a result, the Stackelberg leader will produce more than the follower, taking advantage of its first-mover position to capture a larger share of the market.

According to the Stackelberg Duopoly Model, If Both Firms in the Industry