[Grokking Differential Game Theory S05E01] Why a Leader Wants to Break Its Promise

A binding output promise can persuade a rival to produce less, yet become unattractive after the rival has acted. We derive Cournot and Stackelberg quantities in a symmetric duopoly, calculate the leader’s profitable deviation, and distinguish that temptation from equilibrium when release is anticipated. 00:00 A promise that changes another decision 00:56 Build the common market 01:59 Fold profit into a reaction curve 02:58 Simultaneous choices meet 04:01 Choose a point on the follower’s curve 05:04 Measure the first-mover advantage 06:11 Production and commitment can coincide 07:15 Release the leader after the response 08:59 Credibility is part of the game This exposition video is based on Chapter 5, Section 5.1 of Differential Games in Economics and Management Science by Engelbert J. Dockner, Steffen Jørgensen, Ngo Van Long, and Gerhard Sorger.