How does the Stackelberg model of oligopoly differ from the dominant firm model?
A)The Stackelberg model assumes a single leader firm unlike the dominant firm model where all firms share output equally.
B)In the dominant firm model,the fringe firms are competitive while in the Stackelberg model,the follower firms display Cournot behavior.
C)The dominant firm model is only applicable to a duopoly while the Stackelberg model can be applied to all oligopolistic markets.
D)The Stackelberg leader produces along the market demand curve while the dominant firm produces along the residual demand curve.

Question

Quizplus · Accepted Answer

In the dominant firm model, the fringe firms are competitive and take the price set by the dominant firm as given. In the Stackelberg model, the follower firms react to the leader's output decision, displaying Cournot behavior.

How Does the Stackelberg Model of Oligopoly Differ from the Dominant