The Stackelberg model is different from the Cournot model because:
A)the Stackelberg model assumes that firms compete by varying their prices while the Cournot model assumes that firms compete by varying their output.
B)the Stackelberg model assumes that one firm selects its output on the basis of the other firm's reaction curve while the Cournot model assumes that both firms take each other's output as given.
C)the Stackelberg model assumes that both firms try to predict each other's reaction curves while the Cournot model assumes that the level of output of both firms is fixed.
D)the Stackelberg model assumes that one firm dominates the market through its market share while the Cournot model assumes that all firms are small relative to the market.

Question

Quizplus · Accepted Answer

The key difference between the Stackelberg model and the Cournot model is that in the Stackelberg model, one firm is the leader and selects its output based on the other firm's reaction curve, while the other firm is a follower and takes the leader's output as given. In contrast, in the Cournot model, both firms set their output levels simultaneously based on their expectations about how the other firm will respond. The other choices mentioned are not correct.

The Stackelberg Model Is Different from the Cournot Model Because