Information Advantage In Stackelberg Duopoly Under Demand Uncertainty

The authors consider a Stackelberg model under demand slope uncertainty in an environment where the follower owns information advantage. Specifically, they show that the second mover obtains higher expected profit than the first mover when the leader only knows the prior beliefs and the follower gains the posterior probabilities. This result tells us that the leadership advantage is dominated by the information advantage when demand fluctuation is important. The Stackelberg model is one of the most widely used models in industrial organization for analyzing firms' behavior in a competitive environment.