STACKELBERG, COURNOT AND COLLUSIVE MONOPOLY: PERFORMANCE AND WELFARE COMPARISONS

This article compares and evaluates performance and welfare in three classical oligopoly models: Stackelberg leader, Cournot, and collusive monopoly. Hahn's stability conditions render an unambiguous ranking of market price; the monopoly price is highest and the Stackelberg price is lowest. Welfare comparisons are less clear-cut due to additional effects coming from reallocation of outputs among sellers. Conditions under which these reallocation effects will enhance or offset the unambiguous price effects on welfare are discussed and examples are given. Possible implications for antitrust policy, regarding constraints on market share of large producers in noncompetitive markets, are examined.