Stackelberg games

Stackelberg games feature strategic interactions among rational agents in markets on which some hierarchical competition takes place. In this chapter we present three prototypes of deterministic non-cooperative Stackelberg games with increasing level of generality. The first is the basic duopoly game. The second is the multiple leader–follower game. The third extends the multiple leader–follower game within the framework of bilateral oligopoly to cover a multi-commodity market. In each case, we define and characterize the strategic equilibrium. In addition, we study the consequences of market power and the implications in terms of welfare. We also consider endogenous timing, merging and free entry. We also compare the Stackelberg equilibria with the corresponding Cournot equilibria and with the competitive equilibrium.