Dynamics of stackelberg duopoly

• Stackelberg leadership is understood as a stationary supply taking account of the follower's Cournot reaction function. However, given the follower always adheres to the reaction function, the leader could also choose a dynamic, for instance, periodic sales policy over time. Using Stackelberg's exponential inverse demand function, it is shown that such periodic policies indeed are more advantageous than the stationary solution. Simple orbits can be learned by the follower, and adaptation then throws the system back to the stationary case. It is, however, shown how the leader can choose long-period orbits of sufficient irregularity (of even random or chaotic appearance) so as to prevent the follower from such learning. 

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SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

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