The Chamberlin and Stackelberg Duopoly Relation*

Abstract

The paper investigates and identifies an important relationship between the Chamberlin and Stackelberg duopoly models. Under conditions of symmetry, linear demand and constant costs, the two iso‐profit curves identifying the Stackelberg leadership points are shown to be tangent at the Chamberlin point. Under these conditions profit‐maximising duopolists are indifferent to being Stackelberg output leaders and coalescing in an equal‐shares‐joint‐monopoly solution. This result is shown to be sensitive to the constant cost and linear assumptions. Under increasing linear marginal costs, the joint monopoly solution is preferred by both sellers to a leader‐follower solution.