How does the Cournot model of oligopoly differ from the Stackelberg model?
A)The Cournot model cannot be extended to include more than two firms unlike the Stackelberg model.
B)The Cournot model explains the mutual interdependence of firms in an oligopoly market unlike the Stackelberg model.
C)The equilibrium output in the Stackelberg model is relatively higher than the Cournot model.
D)The Cournot model assumes that a single firm is the market leader while the Stackelberg model assumes no single firm has a large market share.

Question

Quizplus · Accepted Answer

The Cournot model and the Stackelberg model are both models of oligopoly, but they differ in how they model the behavior of firms. In the Cournot model, firms assume that their competitors' output is fixed and therefore do not react to changes in output by other firms. This leads to a situation where each firm produces a quantity of output that is a function of the quantity produced by its competitors. In contrast, the Stackelberg model assumes that one firm is the leader and sets its output first, and the other firms react to this output by setting their own output levels. This leads to a situation where the equilibrium output in the Stackelberg model is relatively higher than the Cournot model.

How Does the Cournot Model of Oligopoly Differ from the Stackelberg