Heinrich Freiherr von Stackelberg (1905-1946) was a German economist who contributed to game theory and oligopoly theory.

Stackelberg was born in Moscow, Russia into an Baltic-German nobility family. Following World War I the family fled to Germany, where Stackelberg studied mathematics and economics at the University of Cologne. In 1941, Stackelberg became professor of economics at the University of Bonn. In 1944, Stackelberg left Germany for Spain, where he became visiting professor in Madrid and died of lymphoma in 1946. His main work, Marktform und Gleichgewicht (published in 1934) in which he described his well-known duopoly models, became recognized following his death. In Nazi-Germany with its anti-competitive economic policy, nobody was really interested in a theory of competition.

Stackelberg competition is a model of duopoly. In a standard Stackelberg duopoly situation, there are two firms in a certain market, taking into account its competitors production decision. Unlike in the Cournot game, players act sequentually. Assumptions include barriers to entry exist, and that both firms possess market power. In game theory terms, the players of this game are a leader and a follower and they compete on quantity. The leader moves first, choosing a quantity. The follower observes the leader's choice and then picks a quantity.

There are some further constraints upon the sustaining of a Stackelberg equilibrium. The leader must know ex ante that the follower observes his action. The follower must have no means of committing to a future non-Stackelberg follower action and the leader must know this. Indeed, if the 'follower' could commit to a Stackelberg leader action and the 'leader' knew this, the leader's best response would be to play a Stackelberg follower action.

In a Stackelberg game, one player moves before the other player, which can provide either a first-mover advantage or a first-mover disadvantage, depending on the specific assumptions that are made in the game. Other well-known games are the Bertrand game and the Cournot game. The Nash equilibrium plays an important role in solving the Stackelberg game and other games.

Works

• Grundlagen einer reinen Kostentheorie (Foundations of Cost Theory), Vienna, 1932
• Marktform und Gleichgewicht (Market and Equilibrium), Vienna 1934
• Grundlagen der theoretischen Volkswirtschaftslehre (Principles of theoretical Economics), 2. Aufl., Berne 1951
• Theorie der Vertriebspolitik und Qualitätsvariation (Theory of Distribution Policy and Quality Differentiation), in: Ott, A. E., Preistheorie, Cologne 1965, S. 230-318

1905 births | 1946 deaths | Economists | German nobility

Heinrich Freiherr von Stackelberg | Heinrich Freiherr von Stackelberg