The Stackelberg Model for a Leader of Production and Many Satellites

Author:Catalin Angelo Ioan, Gina Ioan
Pages:369-373
SUMMARY

Oligopoly is a market situation where there are a small number of bidders (at least two) of a good non-substituent and a sufficient number of consumers. The paper analyses the Stackelberg model for a leader of production and many satellites. There are obtained the equilibrium productions, maximum profits and sales price where one of the company is the leader of quantity, and other satellites.... (see full summary)

 
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Performance and Risks in the European Economy
369
The Stackelberg Model for a Leader
of Production and Many Satellites
Catalin Angelo Ioan1, Gina Ioan2
Abstract: Oligopoly is a market situation where there are a small number of bidders (at least two) of a good
non-substituent and a sufficient number of consu mers. The paper analyses the Stackelberg model for a leader
of production and many satellites. There are obtained the equilibrium productions, maximum profits and sales
price where one of the company is th e leader of quan tity, and other satellites. There are also survey the
situations where the firm based on its marginal cost of production can effectively take the lead of production.
Keywords: oligopoly; Stackelberg; equilibrium
JEL Classification: D43
1 Introduction
Oligopoly is a market situation where there are a small number of bidders (at least two) of a good non-
substituent and a sufficient number of consumers. Oligopoly composed of two producers called
duopoly.
Considering any number of competing firms producing the same normal good, is interesting t he analysis of
each activity in response to the activity of other companies.
Each of them when it sets the production and the sale price will be considered the productions and prices
of other firms. If one of the companies will settle the price or the quantity produced, the other adjusting
after it, then the price will be called leader of price or leader of production, the others called price
satellites or production satellites.
2 The Stackelberg Model for a Leader of Production and Many Satellites
Consider now m firms Fi, i=
m,1
, a function of price: p(Q)=a-bQ, a,b0 and the total cost of
production TCi=iQ, i=
m,1
, where i is the marginal cost of firm Fi.
1 Associate Professor, PhD, ―Danubius‖ University of Galati, Romania, Address: 3 Galati Boulevard, 800 654 Galati,
Romania, Tel.: +40.372.361.102, fax: +40.372.361.290, Corresponding author: catalin_angelo_ioan@univ-danubius.ro.
2 Assistant professor, PhD, ―Danubius‖ University of Galati, Romania, Address: 3 Galati Boulevard, 800654 Galati,
Romania, Tel.: +40.372.361.102, fax: +40.372.361.290, E-mail: ginaioan@univ-danubius.ro.

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