Tensions in Practice: A binding first move changes the response¶
Two producers in a deliberately simple model
Imagine two producers with zero production cost. The unit price is 12 minus their combined quantity, and each payoff is quantity times price. Each chooses a nonnegative quantity and knows the same model. Compare simultaneous choice with a binding, observable production commitment by A before B chooses. For a fixed quantity q from A between 0 and 12, B’s best response is (12 − q)/2: a larger commitment by A leaves B less reason to produce.
Keep the timing symmetric
Let both producers choose without one holding a binding first move.
Make a credible first move
Allow A to commit before B chooses, changing the response A faces.
Why these aims pull against each other
An early announcement is insufficient: the first quantity must remain fixed. Binding it lets A choose with B’s downward-sloping response in view, while sacrificing A’s ability to revise later.
Choose an arrangement to see what changes and what remains difficult.
Compare the same rows across alternatives. Cells state explicit toy quantities, membership or permissions; colors do not supply additional meaning.
What this choice protects
What it costs
When it fits
Compare the arrangements
Choose simultaneously
The simultaneous equilibrium is 4 each: each is a best response to the other’s 4. Combined quantity is 8 and price is 4.
| Quantity | Unit price | Payoff | |
|---|---|---|---|
| A | 4 | 4 | 16 |
| B | 4 | 4 | 16 |
- What it protects
- Neither producer receives the institutional advantage of choosing a binding quantity first.
- What it costs
- A cannot obtain the modeled first-mover payoff; total quantity is lower than in the sequential arrangement.
- When it fits
- Plausible when binding first moves are unavailable or equal decision timing is the intended rule.
Illustration note: This is an editorial, deliberately bounded illustration. Its stated rules and any numbers are invented, not observations, recommended settings, or predictions.
A commits first
A commits to 6, anticipating B’s response of 3. Combined quantity is 9, price is 3, and payoffs are 18 and 9. Maximizing A × (12 − A)/2 gives the displayed commitment of 6.
| Quantity | Unit price | Payoff | |
|---|---|---|---|
| A | 6 | 3 | 18 |
| B | 3 | 3 | 9 |
- What it protects
- A receives 18 rather than 16 under the fixed model by shaping B’s later response.
- What it costs
- B receives 9 rather than 16. A must be unable to withdraw the commitment if circumstances change.
- When it fits
- Plausible when A can make an effective commitment and the modeling assumptions fit the decision; this does not justify granting A the privilege.
Illustration note: This is an editorial, deliberately bounded illustration. Its stated rules and any numbers are invented, not observations, recommended settings, or predictions.
What this illustration does—and does not—establish
The source establishes the structural tension; the concrete alternatives and their conditional costs are editorial synthesis. No arrangement is a universal recommendation.
- This is an invented continuous-quantity model, not a market forecast, pricing recommendation or empirical estimate.
- The commitment is to output, not merely a nonbinding announcement or an unused capacity ceiling.
- No uncertainty, production cost, collusion, entry or welfare calculation is included. The producer payoffs alone do not rank outcomes for everyone.
Source entries
Strategic Substitute
Strategic substitute Quantity versus Capacity Pre-Commitment (temporal) supplies the local tension. The setting, alternative arrangements, and stipulated consequences are editorial applications.
Quantity versus Capacity Pre-Commitment (temporal)
Cournot-style substitutes assume actors choose quantities simultaneously, but if one can pre-commit capacity, the timing converts the game and the dampening logic no longer holds.