Stackelberg versus Cournot oligopoly with private information

Cumbul, Eray

doi:10.1016/j.ijindorg.2020.102674

Cited by 9 publications

(2 citation statements)

References 48 publications

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“…Additionally, we observe that, although the capacities are larger in the Stackelberg game, the efficiency of the companies in the Cournot is higher based on the NPV. Our finding is consistent with other studies, which demonstrate that higher production in Stackelberg lowers the equilibrium price and the total profit relative to the Cournot model (e.g., Anderson & Engers, 1992;Cumbul, 2021). This result is also based on incorporating strategy and dynamics of the environment into the models that allow the leader firm to set prices sufficiently low to limit or deter the competitor, yet high enough to maximize the NPV (Schenzler et al, 1992).…”

Section: Baseline Resultssupporting

confidence: 91%

“…On the other hand, the company with lower production costs is better off becoming a follower rather than making the first move or moving simultaneously. Cumbul (2021) studies an oligopoly market of n firms competing for a product with a stochastic demand behavior and compares the Cournot model with the Stackelberg model in a market with private or asymmetric information.…”

Section: Literature Reviewmentioning

confidence: 99%

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Game‐theoretic approaches to product introduction strategies for durable products

Pirayesh Neghab,

Restrepo Diaz,

Cevik

et al. 2024

Manage Decis Econ

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New product demand continuously fluctuates throughout the life of the product. As a result, markets typically experience high volatility. Most companies operate in highly competitive industries where the product volume supplied by the competitors significantly affects production plans. These conditions necessitate companies to be flexible and rapidly adapt to such volatility. In this study, we investigate the product introduction strategies under two microeconomic theories: real‐option valuation and game theory. Specifically, we develop a real‐option valuation framework with a flexible capacity based on two game‐theoretic models, namely, Stackelberg and Cournot, in a duopoly market where competitors have either perfect or imperfect information. Furthermore, we construct a lattice to discretize the demand evolution and adopt a regime‐switching approach to characterize the stochastic product lifetime. We conduct an extensive numerical study and compare net present values (NPVs) and optimal capacities obtained from the game‐theoretic models. Our results show that under perfect information, the Stackelberg competition generates more supply with lower prices and less total than the Cournot competition. Moreover, we find that, compared to the fixed‐capacity system, the flexible capacity system increases the in the Stackelberg game (by 5.5%) more than in the Cournot game (by 3.3%). We provide further results on the performance of the companies based on detailed sensitivity analysis for various model parameters. In particular, we observe that fixed and variable production and installation costs majorly impact capacity allocation decisions and profits.

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Section: Baseline Resultssupporting

confidence: 91%

Section: Literature Reviewmentioning

confidence: 99%