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Price competition in a mixed duopoly with discontinuous marginal cost function

Author

Listed:
  • Amarjyoti Mahanta

    (Department of Humanities and Social Sciences, Indian Institute of Technology Guwahati India)

Abstract

In this paper, we study price competition in a mixed duopoly with discontinuous marginal cost function. We obtain that the set of pure strategy Nash equilibrium is a range of prices. We show that when the market size is sufficiently big, the set of Nash equilibrium in the mixed duopoly is the same as the Bertrand competition with two firms. Hence, social welfare is also similar in this case. However, the upper bound of the set of pure strategy Nash equilibrium can be lower in the case of mixed duopoly than Bertrand competition with two firms, when the market size is not sufficiently big. Therefore, the nature of ownership is relevant in the case of smaller markets and not in the case of big markets. When the cost function of one of the firms is only discontinuous as specified in section 2 and the marginal cost of the other firm is constant, we get unique pure strategy Nash equilibrium in certain cases.

Suggested Citation

  • Amarjyoti Mahanta, 2022. "Price competition in a mixed duopoly with discontinuous marginal cost function," Economics Bulletin, AccessEcon, vol. 42(2), pages 330-341.
    • Handle: RePEc:ebl:ecbull:eb-20-01095
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I2-P30.pdf
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    References listed on IDEAS

    as
    1. Gareth Myles & Hassan Khodavaisi & Nigar Hashimzade, 2007. "An irrelevance result with differentiated goods," Economics Bulletin, AccessEcon, vol. 8(2), pages 1-7.
    2. Gareth Myles, 2002. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result for the general case," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-6.
    3. Roy Chowdhury, Prabal, 2009. "Bertrand competition with non-rigid capacity constraints," Economics Letters, Elsevier, vol. 103(1), pages 55-58, April.
    4. repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
    5. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
    6. Prabal Roy Chowdhury, 2009. "Bertrand competition with non-rigid capacity constraints," Discussion Papers 09-02, Indian Statistical Institute, Delhi.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Mixed Duopoly; Price competition;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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