In the Stackelberg model, the leader has a first-mover advantage because it
A)has lower costs than the follower.
B)chooses its output to manipulate the follower to produce the output that most benefits the leader.
C)reacts to the follower's decision.
D)differentiates its output.

Question

Quizplus · Accepted Answer

In the Stackelberg model, the leader has the first-mover advantage because it can choose its output strategically to manipulate the follower to select the output that benefits the leader the most. The leader can use its market power to set the price or quantity that forces the follower to react in a certain way, giving the leader an advantage. The leader's lower costs or differentiation do not necessarily give it a first-mover advantage in this model.

In the Stackelberg Model, the Leader Has a First-Mover Advantage