Economic Theory Bulletin https://doi.org/10.1007/s40505-019-00167-3 RESEARCH ARTICLE Stackelberg versus Cournot duopoly with asymmetric costs: primary markups, entry deterrence, and a comparison of social welfare and industry profits Jan Zouhar 1 · Martina Zouharova 1 Received: 14 March 2018 / Accepted: 15 April 2019 © Society for the Advancement of Economic Theory 2019 Abstract In a linear Stackelberg (S) and Cournot (C) duopoly model with homogeneous product, it is well known that S yields higher consumer surplus than C. The comparison of social welfare (or industry profit), however, can go both ways if costs are asymmetric. We show that a remarkably simple characterization can be obtained in terms of the ratio of the leader’s and the follower’s primary markup: social welfare (industry profit) is greater in C than in S if and only if this ratio is between 1 /2 and 31 /38 (between 1 /2 and 19 /14). Furthermore, this ratio also determines the qualitative type of equilibrium: Monopoly is reinstalled from both S and C if and only if the ratio lies outside the interval ( 1 /2, 2); for values between 3 /2 and 2, the Stackelberg leader deters entry of an inefficient follower while producing more than a monopolist would. Keywords Stackelberg oligopoly · Cournot oligopoly · Linear model · Homogeneous product · Primary markup · Entry deterrence JEL Classification D43 · L13 The authors gratefully acknowledge funding from the Faculty of Informatics and Statistics, University of Economics, Prague (Grant no. IP 400040). Electronic supplementary material The online version of this article (https://doi.org/10.1007/s40505- 019-00167-3) contains supplementary material, which is available to authorized users. B Jan Zouhar zouharj@vse.cz Martina Zouharova em.zouharova@gmail.com 1 University of Economics, W. Churchill Sq. 1938/4, 13067 Prague 3, Czech Republic 123