The output of firms is determined simultaneously in Cournot competition but sequentially in Stackelberg competition.

Question

BlackTom AI · Accepted Answer

Consider the statement about how outputs are determined in two standard strategic-form competition models.
Option 1: Cournot. In Cournot competition, firms choose quantities simultaneously in each period, given beliefs about rivals' outputs, and then the market clears at a price determined by the total quantity. This simultaneity is a defining feature of Cournot models, as opposed to sequential moves.
Option 2: Stackelberg. In Stackelberg competition, firms move sequentially: a leader first chooses its output, observing the follower’s reaction, and the follower responds after the leader commits to a quantity. This sequential structure is the hallmark of the Stackelberg framework.
Putting the two together, the completed sentence with the given terms reads: The output of firms is determined simultaneously in Cournot competition but sequentially in Stackelberg competition. This matches the core characteristics of the two models, since Cournot relies on simultaneous quantity-setting, while Stackelberg relies on a leader–follower dynamic with sequential decisions.
If we think about potential misconceptions, one might confuse Stackelberg with a simultaneous-move game or recall that in dynamic models some notions of quantity can be modeled differently, but the essential distinction remains: Cournot is simultaneous, Stackelberg is sequential. There are no other options to consider here, as the statement hinges precisely on these two canonical definitions.

ECON3200001.1251 Quiz 13: Market Structures

The output of firms is determined simultaneously in Cournot competition but sequentially in Stackelberg competition.

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