In the Stackelberg model
A)Each firm takes the quantities produced by its rivals as given
B)Each firm takes the prices charged by its rivals as given
C)One firm plays a leadership role and its rivals merely react to the leader's quantity
D)Prices are higher and quantities are slightly less than we would see if the firms colluded to achieve the monopoly outcome

Question

Quizplus · Accepted Answer

In the Stackelberg model, one firm (the leader) sets its quantity first, and then the other firms (the followers) react by setting their quantities. This means that the followers take the leader's quantity as given, and the leader has a strategic advantage. Therefore, C is the correct answer. Choices A and B describe the Cournot model, where firms compete by setting quantities simultaneously. Choice D is not necessarily true, as outcomes in the Stackelberg model depend on the specific circumstances of the market.

In the Stackelberg Model