When firm 1 acts as a Stackelberg leader:
A) Firm 2 produces the monopoly output.
B) Firm 1's profit is less than its profit if they compete in a Cournot fashion.
C) Firm 2 will earn more than if they compete in a Cournot fashion.
D) None of the answers is correct.

Question

Quizplus · Accepted Answer

In a Stackelberg model, the leader (firm 1) typically earns more profit than in Cournot competition, and firm 2, the follower, earns less than in Cournot competition.

When Firm 1 Acts as a Stackelberg Leader