What is stackelberg game?

The Stackelberg game is a non-cooperative game in which a leader firm determines its strategy first, and then the follower firm chooses its strategy based on the leader's decision. The Stackelberg game is also known as the leader-follower game and is used in various fields such as economics, game theory, and business strategy.

In the Stackelberg game, the leader firm chooses its best strategy to maximize its profits in anticipation of the follower firm’s response. Then the follower firm chooses its best response to the leader’s decision. The leader firm has the advantage of moving first and knowing the follower firm’s possible actions. On the other hand, the follower firm has the disadvantage of moving second and having limited information about the leader’s strategy.

The Stackelberg game is used in various scenarios, including oligopoly markets, military strategy, and cybersecurity. It is also used in real-life situations such as price competition, product differentiation, and advertising. The Stackelberg game is a crucial tool for firms to gain a competitive advantage and determine their strategies to succeed in the market.