@@ -1117,6 +1117,13 @@ axes[2].set(title=r'$v(y_{t})$ and $w(\hat x_t)$', xlabel='t')
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1117 | 1117 | plt.tight_layout() |
1118 | 1118 | plt.show() |
1119 | 1119 | ``` |
| 1120 | +The figure above shows |
| 1121 | + |
| 1122 | +* in the third panel that for $t \geq 1$ the **reborn at $t$** Stackelberg leader's's value $w(\hat x_0)$ exceeds the continuation value $v(y_t)$ of the time $0$ Stackelberg leader |
| 1123 | +* in the first panel that for $t \geq 1$ the **reborn at $t$** Stackelberg leader wants to reduce his output below that prescribed by the time $0$ Stackelberg leader |
| 1124 | +* in the second panel that for $t \geq 1$ the **reborn at $t$** Stackelberg leader wants to increase the output of the follower firm 2 below that prescribed by the time $0$ Stackelberg leader |
| 1125 | + |
| 1126 | +Taken together, these outcomes express the time inconsistency of the original time $0$ Stackelberg leaders's plan. |
1120 | 1127 | |
1121 | 1128 | ## Recursive Formulation of Follower's Problem |
1122 | 1129 | |
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