Match the following oligopoly model with its definition.
1: Cournot model
2: Price (Stackelberg) leadership model

Question

BlackTom AI · Accepted Answer

The question asks you to match two oligopoly models with their definitions.
Option A (as listed in the answer options): 'Assumes that firm i treats firm j’s output as fixed in its decisions and is a symmetric game.' This description corresponds to the Cournot model, where each firm chooses its output assuming rivals' outputs are fixed, and the game is symmetric because firms typically have identical cost structures and face the same demand.
Option B (as listed in the answer options): 'Assumes that firm j’s output will respond to variations in firm i’s output and is a asymmetric game.' This captures the Stackelberg or leader–follower (price leadership) model, where the leader (say firm i) commits to an output, and the follower (firm j) best-responds to the leader’s choice, creating an asymmetry in roles and information; the interaction is not symmetric because the strategies and incentives of leader and follower differ.

To evaluate correctness more explicitly:
- If we consider Cournot as a simultaneous-mirmove setting with fixed rival outputs in each firm’s decision, the description in Option A is accurate for Cournot: firm i treats firm j’s output as given when deciding its own output, and the strategic form is symmetric since both firms face the same rules and payoffs.
- For the Stackelberg leadership model (often described as price leadership in some contexts), the critical feature is the sequential move structure and the asymmetry it creates: one firm moves first and the other responds. The phrase 'Assumes that firm j’s output will respond to variations in firm i’s output' highlights the follower’s reaction to the leader, which is central to Stackelberg; this is indeed asymmetric because the leader and follower do not have identical strategic positions.

In summary, Option A correctly identifies Cournot as the model where rivals’ outputs are treated as fixed and the game is symmetric, while Option B correctly identifies the Stackelberg leadership framework where the follower responds to the leader, yielding an asymmetric game.

2251-ECON-301-01Z-J1-1027 Quiz 15 (1% of Course Grade) - Chapter 28 - Oligopoly

Match the following oligopoly model with its definition. 1: Cournot model 2: Price (Stackelberg) leadership model

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