A Two-Stage Quantity-Setting Duopoly: Cournot or Stackelberg

This paper considers a two-stage quantity-setting duopoly model. In the first stage, each firm independently announces its output. Each firm can discount its announced output but cannot raise it. In the second stage, each firm independently chooses its actual output. The paper classifies demand functions into the following four cases in terms of the goods relevance and strategic relevance between both firms: “substitute goods and strategic substitutes”, “substitute goods and strategic complements”, “complementary goods and strategic substitutes” and “complementary goods and strategic complements”. The paper presents the subgame perfect Nash equilibrium in each of four cases.