Endogenous Stackelberg Leadership

We consider a linear quantity setting duopoly game and analyze which of the players will commit when both players have the possibility to do so.To that end, we study a 2-stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2.We show that committing is more risky for the high cost rm and that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the low cost rm will choose to commit.Hence, the low cost firm will emerge as the endogenous Stackelberg leader.game theory;duopoly

Games with imperfectly observable commitment

Game Theory

Commitment robust equilibria and endogenous timing

Game Theory

Endogenous price leadership

duopoly;game theory;pricing;price leadership