Endogenous Sequencing of Firm Decisions

Abstract

When firms are symmetrically informed, a Stackelberg leader prefers to be leader rather than a Cournot duopolist. However, when the leader has superior information about demand, the leader may earn lower ex ante profits than it would earn if it was choosing quantities simultaneously with the follower. In this paper I give the firm with superior information the option of delaying its quantity decision until the decision period of the less informed firm (so that decisions are made simultaneously). Surprisingly, in the unique stable outcome, the informed firm moves first, regardless of its private information. Journal of Economic Literature Classification Numbers: C72, C73, D82, L10. © 1993 Academic Press, Inc.