Question

What can you say, in general, about the Cournot-Nash equilibrium quantities and prices as the number...

What can you say, in general, about the Cournot-Nash equilibrium quantities and prices as the number of sellers (n) competing in the industry rises?

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Answer #1

In Cournot competition firms simultaneously choose a quantity to produce and the price is determined by their sum. In Stackelberg competition, one firm chooses first then the second firm acts with this information.

It's a little hard to explain without going through the math, but basically firm that acts first in Stackelberg can be a little greedier and produce more than it would in Cournot. This increase is only partially offset by a decrease in firm 2's production. Since net production increases in Stackelberg, price decreases.

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