Stackelberg Competition Model

Stackelberg and Others, Stackelberg Competition Model

A year later than Chamberlin and Robinson, the German economist, H. von Stackelberg, showed some of the implications or potentialities of the theory of mo­nopolistic competition by independently developing it in a form suitable for Fascism. In addition to the purely quantitative profit principle, he introduces several elements in pricing. These include habits, tendencies to stability, agreements, and time lags. Stackelberg distinguishes and analyzes various cases of duopoly and of joint demand.

Other German economists have developed the theory.

In France, relatively little seems to have been done in this field until very recently.

But in Holland and Scandinavia, a good deal has been added. One of the earlier independent thinkers in this field, F. Zeuthen of Denmark, has continued to discuss problems of price policy, advertising expense, and market homogeneity. He and other Scandinavian economists have worked effectively with engineers.

Notable is the thought of J. Tinbergen, who in 1946 showed the results of extensive study of monopoly, duopoly, and oligo­poly. He brings out the limitations of mathematical treatment of the subject, emphasizing the difference between short and long term considerations, and the existence of extra-economic motives. And W. L. Snijders has presented a searching and suggestive criticism of the theories of the leaders in limited-competition theory. He emphasizes qualitative problems.

In England, N. Kaldor contributed to the development of Robinson's approach.

In America, after Chamberlin's book, the main tendency was toward special studies describing and analyzing the behavior of firms in deciding on prices, sales policies, and outputs. Robert Triffin and G. J. Stigler appear as the chief contributors to the general theory; but A. R. Burns's book on The Decline of Compe­tition (1936) should also be mentioned as having had consider­able influence. For the rest, there have been numerous articles and monographs dealing with the classification of markets, price policies, and spatial relations in individual industries and trades, with J. M. Clark outstanding. One development is the realization that under conditions of oligopoly, the demand or sales curve of-the firm may be "kinked" or bend sharply at the point of the current price, because reactions expected from com­petitors if the price were raised differ from those that would result if the price were reduced. These writings exerted a con­siderable influence upon public policy concerning regulation of business, notably with reference to anti-trust procedure, price-fixing, and the "basing point system." But, after a careful study of contemporary thought in 1948, one sympathetic student of the subject ends by referring to "the extremely inconclusive and fragmentary character of our solutions to these problems at present, and the nascent character of much of the needed research endeavor."