A Stackelberg game model of dynamic duopolistic competition with sticky price

We develop the following Stackelberg game model of dynamic duopoly with sticky prices; the leader chooses its time profile of outputs to maximize the discounted sum of proftis, while the follower chooses the optimal output to maximize the instantaneous profit as a myopic profit maximizer at each point of time. Then, we compare the resulting outcomes with those in a Stackelberg model without price stickiness. I am grateful to John Conley for helpful comments and suggestions. All remaining errors are, of course, my responsibility