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Rare indeed is the Habilitation work that makes its author's name a standard item in the vocabulary of scholars - in the case at hand, economists. But such was Heinrich Freiherr von Stackelberg's 1934 book, Marktform and Gleichgewicht (Market Structure and Equilibrium). The author's methodological contribution is memorialized in economists' references to Stackelberg isoprofit diagrams, and the pattern of market interactions emphasized in his work is now called Stackelberg leadership.
Von Stackelberg as mathematical economist
A question that has long fascinated me is how a book of such great mathematical virtuosity as Marktform and Gleichgewicht sprang up, as if by magic, from the study of economics in a Germany still dominated by the historical school. The answer proved to be unexpectedly simple[1]. After emigrating from his birthplace in Russia following the Bolshevik revolution, von Stackelberg studied both mathematics and economics at the University of Cologne. He apparently considered a career in mathematics, but found greater real-world challenge in economics. At the time, mathematical methods were just beginning to gain momentum among German economists. Joseph A. Schumpeter preached his Walrasian gospel in Bonn between 1925 and 1932. Schumpeter supported the work of Erich Schneider, who made pioneering contributions to mathematical economics while earning a living as a mathematics teacher. Schneider had previously been encouraged to study mathematics by business economists at Frankfurt. At Cologne, von Stackelberg was guided by Erwin von Beckerath, whose interests went beyond the historical school. Thus, the seeds were planted, and von Stackelberg's doctoral dissertation pursued a systematic mathematical approach to the theory of cost.
At the time von Stackelberg began his Habilitation work, interest in theories of rivalrous interaction among business firms had reached a fever pitch. Large business enterprises were attaining an increasingly dominant position in the industrialized world. In 1926, an influential article by Piero Sraffa challenged the economics profession to bring forward theories that dealt more satisfactorily with the widespread existence of scale economies and monopolistic market structures (Sraffa, 1926). During the next seven years, important new contributions on business enterprise behaviour in the structural grey area between monopoly and competition appeared inter alia from Harold Hotelling, Edward Chamberlin, Frederik Zeuthen, Joan Robinson, and in Germany, Erich Schneider. In 1932 von Stackelberg studied in Italy with Professor Luigi...