Experiment 5 GT1

• Stackelberg Model competition
• sequential
  • start analysis with last mover (player 2)
• payoff table is not the normal form
  • strategies are horizontal “slides” which always funnel to the equilibrium in each row
  • strategy of player 2: $q_2=500-0.5\ast q_1$
  • Nash Equilibrium at 500, 250
  • always true, unless Reputation says player 2 is crazy

Math Expressions

• ${\Pi }_2=P\ast Q^{\ast }=(1-0.001(Q_1+Q_2))\ast Q_2$
  • maximize → Optimization
• ${\Pi }_1=P\ast Q^{\ast }=(1-0.001(Q_1+500-0.5Q_1))\ast Q_1$
  • maximize → Optimization
• Nash Equilibrium at 500, 250