If both firms in a duopolistic industry face identical demands and identical total production costs, then:
A) Total industry output predicted by the Stackelberg duopoly model will less than total industry output predicted by the Cournot duopoly model.
B) Total industry output predicted by the Stackelberg duopoly model will greater than total industry output predicted by the Cournot duopoly model.
C) Total industry output predicted by the Stackelberg duopoly model will be the same as total industry output predicted by the Cournot duopoly model.
D) None of the above. It is more appropriate to compare the Stackelberg duopoly model with the Bertrand duopoly model.

Question

Quizplus · Accepted Answer

In the Stackelberg duopoly model, the firm that moves first (the leader) produces more output than in the Cournot model, where firms choose their outputs simultaneously. This leads to a higher total industry output in the Stackelberg model compared to the Cournot model.

If Both Firms in a Duopolistic Industry Face Identical Demands