13.2 Sequential Games
In a static Cournot game (Chapter 12), before the firms (simultaneously) choose their output levels, Firm 1 could threaten Firm 2 that it will produce a very large output. If Firm 2 believed that threat, it would be in Firm 2’s best interest to reduce its output below the Cournot level, ceding an advantage to Firm 1. However, Firm 2 is unlikely to believe this threat as Firm 1 has not made any commitment to produce the large quantity and therefore might not do it. And Firm 2 could make the same threat, or at least could threaten to produce the Cournot quantity. Firm 1 should not be able to gain a strategic advantage over Firm 2 because they are in symmetric positions.
On the other hand, if Firm 1 produces a large quantity ...
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