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Duopoly competitions with capacity constrained input

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  • Nie, Pu-yan
  • Chen, You-hua

Abstract

This paper focuses on the duopoly substitutability product with an upstream input subjected to capacity constraints. The effects of capacity constraints are captured. Combining competition effect with constraint effect, some interesting conclusions are reached. First, the relationship between capacity constraints and firm size is addressed. We argue that the capacity constraints reduce market size difference and price difference under Cournot. Second, under the Stackelberg case, the existence of solution is proved, and Stackelberg competitions enlarge firm-size difference and price difference if the more efficient firm plays the leading position. When the weaker firm plays the leading position, the conclusions depend on the total capacity. Finally, under the Stackelberg case, when the stronger firm plays the leading position, the firm-size difference and price difference decrease with total input under capacity constraints, which is contrary to the conclusions under Cournot competitions.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 5 ()
Pages: 1715-1721

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1715-1721

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Capacity constraints; Cournot competition; Firm-size difference; Stackelberg; Price dispersion;

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References

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  1. Samuelson, Larry & Zhang, Jianbo, 1992. "Search costs and prices," Economics Letters, Elsevier, vol. 38(1), pages 55-60, January.
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  5. Sacco, Dario & Schmutzler, Armin, 2011. "Is there a U-shaped relation between competition and investment?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 65-73, January.
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  7. Arnold, Michael A. & Saliba, Christine, 2011. "Asymmetric capacity constraints and equilibrium price dispersion," Economics Letters, Elsevier, vol. 111(2), pages 158-160, May.
  8. X. Wang & Bill Yang, 2010. "The sunk-cost effect and optimal two-part pricing," Journal of Economics, Springer, vol. 101(2), pages 133-148, October.
  9. Volker Nocke & Peter EsoLucy White, 2007. "Competition for Scarce Resources," Economics Series Working Papers 365, University of Oxford, Department of Economics.
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Cited by:
  1. Nie, Pu-yan, 2013. "Duopoly quality commitment," Economic Modelling, Elsevier, vol. 33(C), pages 832-842.
  2. Pu-yan Nie, 2014. "Effects of capacity constraints on mixed duopoly," Journal of Economics, Springer, vol. 112(3), pages 283-294, July.

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