AP MicroeconomicsMarket Structures
Stackelberg Model
The Stackelberg model is an oligopoly model where a leader firm sets output first and a follower firm then chooses its output in response.
Unlike Cournot's simultaneous choices, the Stackelberg leader moves first and, anticipating the follower's reaction, produces more than in Cournot to grab market share, earning higher profit. The follower produces less. Solved by backward induction, it gives the leader a first-mover advantage in quantity competition and produces a total output above the Cournot level (closer to competitive output).
Formula / Example
Leader maximizes profit anticipating follower's reaction function q_f = R(q_L); solve by backward induction