Stackelberg Competition

Stackelberg competition describes a market scenario where one firm (the leader) sets its production quantity first, knowing that other firms (followers) will respond afterward. The leader uses this advantage to influence the market outcome, aiming to maximize its profit. Following the leader’s choice, the followers then decide their quantities based on the leader’s decision, which impacts the overall market price and profits of all firms involved. This model highlights strategic behavior and decision-making timing, emphasizing how first-mover advantages can shape competitive dynamics in oligopolistic markets.