Journal of Economics

, Volume 107, Issue 3, pp 239–255 | Cite as

Leaders and competitors

  • Susumu CatoEmail author
  • Ryoko Oki


The purpose of this article is to investigate the properties of equilibrium in a market with a leader. In particular, we examine how the equilibrium values depend on existing competitors. When the number of competitors is exogenously given, most equilibrium values, including the leader’s strategies, depend on the structure of the competitors: the number of incumbent competitors, their technologies, and their objective functions. In contrast, when an entry is endogenous, the equilibrium values, including not only the leader’s strategies but the entrants’ as well, are independent of such properties of the incumbent competitors. We provide several applications of our main result in industrial organization issues.


Leadership Endogenous entry Strategic commitment Incumbent competitor 

JEL Classification

L11 L13 L16 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Brander JA, Spencer B (1983) Strategic commitment with R&D: the symmetric case. Bell J Econ 14:225–235CrossRefGoogle Scholar
  2. Cato S (2011a) Privatization policy and cost-reducing investment by the private sector. Manch Sch 79:1157–1178Google Scholar
  3. Cato S (2011b) The efficiency of the state-owned firm and social welfare: a note. Bull Econ Res (forthcoming)Google Scholar
  4. Cato S, Oki R (2011) The top-dog and the lean and hungry look strategies in endogenous entry. Econ Model 28:2776–2782CrossRefGoogle Scholar
  5. Czarnitzki D, Etro F, Kraft K (2008) The effect of entry on R&D investment of leaders: theory and empirical evidence. University of Milan-Bicocca, Working Paper Series No. 163Google Scholar
  6. d’Aspremont C, Jacquemin A (1988) Cooperative and noncooperative R&D in duopoly with spillovers. Am Econ Rev 78:1133–1137Google Scholar
  7. Daughety AF (1990) Beneficial concentration. Am Econ Rev 80:1231–1237Google Scholar
  8. Davidson C, Mukherjee A (2007) Horizontal mergers with free entry. Int J Ind Organ 25:157–172. doi: 10.1016/j.ijindorg.2006.03.003 CrossRefGoogle Scholar
  9. Delbono F, Denicolò V (1993) Regulating innovative activity: the role of a public firm. Int J Ind Organ 11:35–48. doi: 10.1016/0167-7187(93)90034-A CrossRefGoogle Scholar
  10. Etro F (2004) Innovation by leaders. Econ J 114:281–303. doi: 10.1111/j.1468-0297.2004.00210.x CrossRefGoogle Scholar
  11. Etro F (2006) Aggressive leaders. RAND J Econ 37:146–154. doi: 10.1111/j.1756-2171.2006.tb00009.x CrossRefGoogle Scholar
  12. Etro F (2008) Stackelberg competition with endogenous entry. Econ J 118:1670–1697. doi: 10.1111/j.1468-0297.2008.02185.x CrossRefGoogle Scholar
  13. Farrell J, Shapiro C (1990) Horizontal mergers: an equilibrium analysis. Am Econ Rev 80:107–126Google Scholar
  14. Fudenberg D, Tirole J (1984) The fat-cat effect, the puppy-dog ploy, and the lean and hungry look. Am Econ Rev 74:361–368Google Scholar
  15. Ishibashi I, Matsumura T (2006) R&D competition between public and private sectors. Eur Econ Rev 50:1347–1366. doi: 10.1016/j.euroecorev.2005.04.002 CrossRefGoogle Scholar
  16. Ino H, Matsumura T (2011) How many firms should be leaders? Beneficial concentration revisited. Int Econ Rev (forthcoming)Google Scholar
  17. Iwai K (2000) A contribution to the evolutionary theory of innovation, imitation and growth. J Econ Behav Organ 43:167–198. doi: 10.1016/S0167-2681(00)00115-3 CrossRefGoogle Scholar
  18. Julien LA (2011) A note on Stackelberg competition. J Econ 103:171–187CrossRefGoogle Scholar
  19. Kato M, Honjo Y (2009) The persistence of market leadership: evidence from Japan. Ind Corp Change 18:1107–1133. doi: 10.1093/icc/dtp012 CrossRefGoogle Scholar
  20. Kovač E, Vinogradov V, Žigic K (2010) Technological leadership and persistence of monopoly under endogenous entry: static versus dynamic analysis. J Econ Dyn Control 34:1421–1441CrossRefGoogle Scholar
  21. Matsumura T, Kanda O (2005) Mixed oligopoly at free entry markets. J Econ 84:27–48. doi: 10.1007/s00712-004-0098-z CrossRefGoogle Scholar
  22. Nishimori A, Ogawa H (2002) Public monopoly, mixed oligopoly and productive efficiency. Aust Econ Pap 41:185–190. doi: 10.1111/1467-8454.00158 CrossRefGoogle Scholar
  23. Okuno-Fujiwara M, Suzumura K (1993) Symmetric Cournot oligopoly and economic welfare: a synthesis. Econ Theory 3:43–59. doi: 10.1007/BF01213691 CrossRefGoogle Scholar
  24. Poyago-Theotoky J (1998) R&D competition in a mixed duopoly under uncertainty and easy imitation. J Comp Econ 26:415–428. doi: 10.1006/jcec.1998.1541 CrossRefGoogle Scholar
  25. Sutton J (2007) Market share dynamics and the‘persistence of leadership’, debate. Am Econ Rev 97:222–241. doi: 10.1257/000282807780323613 CrossRefGoogle Scholar
  26. Suzumura K (1992) Cooperative and noncooperative R&D in an oligopoly with spillovers. Am Econ Rev 82:1307–1320Google Scholar
  27. Tasnádi A (2010) Quantity-setting games with a dominant firm. J Econ 99:251–266CrossRefGoogle Scholar
  28. Žigic K, Maçi I (2011) Competition policy and market leaders. Econ Model 28:1042–1049CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  1. 1.Institute of Social ScienceUniversity of TokyoTokyoJapan
  2. 2.School of LawHokkaido UniversitySapporoJapan

Personalised recommendations