Reexamination of Stackelberg Leadership: Fixed Supply Contracts Under Demand Uncertainty

This paper shows an endogenous Stackelberg leader-follower relation that stems purely from commitment, not from chronological order of entry. We consider a symmetric duopoly game with a priori demand uncertainty which resolves after a short term. In the beginning, each supplier is allowed to make either a short-term or a long-term fixed-quantity supply contract with retailers. The choice of contractual term lengths depends upon the degree of demand uncertainty as well as time preferences.