In a Stackelberg oligopoly,
A) each firm chooses simultaneously and non-cooperatively how much to produce to maximize its own profit.
B) each firm chooses simultaneously and non-cooperatively its own product's price to maximize its own profit.
C) one firm acts as a quantity leader, choosing its quantity first, while all other firms act as followers, choosing their quantities second and in reaction to the leader.
D) each firm makes its profit-maximizing decision while considering the entire market demand, the same as a monopolist.

Question

Quizplus · Accepted Answer

In a Stackelberg oligopoly, one firm acts as a quantity leader and chooses its quantity first, while all other firms act as followers and choose their quantities second and in reaction to the leader. This is different from other oligopoly models, such as Cournot or Bertrand, where each firm chooses simultaneously and non-cooperatively. Therefore, choice C is the correct answer.

In a Stackelberg Oligopoly