Endogenous Stackelberg leadership

We consider a linear quantity setting duopoly game and analyze which of the players will commit when both players have the possibility to do so. To th at end, we study a two-stage game in which each player can either commit to a quantity in stage 1 or wait till stage 2. We show that committing is mor e risky for the high cost firm and that, consequently, risk dominance consi derations, as in Harsanyi and Selten (1988), allow the conclusion that only the low cost firm will choose to commit. Hence, the low cost firm Will eme rge as the endogenous Stackelberg leader. (C) 1999 Academic Press.