Stackelberg Leader–Follower

Topic: Introduction to Microeconomics — Compare the Stackelberg and Cournot outcomes as marginal cost changes.

Marginal cost (c): 2

MC (c)

Leader q₁

5.00

Follower q₂

2.50

Total Q

7.50

Price

4.50

Leader profit

12.50

Follower profit

6.25

Cournot profit

11.11

The leader commits to a larger output than the Cournot level, which pushes the follower down its best-response line. The leader earns more than a Cournot duopolist, while the follower earns less. As marginal cost rises, both outputs and profits shrink.