IDEAS home Printed from https://ideas.repec.org/a/kap/jeczfn/v108y2013i3p273-289.html
   My bibliography  Save this article

Endogenous timing in a mixed oligopoly under demand uncertainty

Author

Listed:
  • Jianhu Zhang
  • Changying Li

Abstract

This paper analyzes a Hotelling-type game in a mixed oligopoly, where firms can either enter the market in period 1, facing demand uncertainty, or postpone their entry, in order to acquire complete information. It is shown that, for a high (low) level of uncertainty, there is a pure (mixed)-strategy equilibrium. Moreover, the standard result in the literature—that uncertainty is a differentiation force, is only possible when the degree of uncertainty is small. An increase in the degree of uncertainty could force firms to delay their entry and lead to a socially optimal outcome. Copyright Springer-Verlag 2013

Suggested Citation

  • Jianhu Zhang & Changying Li, 2013. "Endogenous timing in a mixed oligopoly under demand uncertainty," Journal of Economics, Springer, vol. 108(3), pages 273-289, April.
    • Handle: RePEc:kap:jeczfn:v:108:y:2013:i:3:p:273-289
    DOI: 10.1007/s00712-012-0273-9
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00712-012-0273-9
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00712-012-0273-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Anderson, Simon P. & de Palma, Andre & Thisse, Jacques-Francois, 1997. "Privatization and efficiency in a differentiated industry," European Economic Review, Elsevier, vol. 41(9), pages 1635-1654, December.
    2. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    3. Balvers, Ronald & Szerb, Lazlo, 1996. "Location in the Hotelling duopoly model with demand uncertainty," European Economic Review, Elsevier, vol. 40(7), pages 1453-1461, August.
    4. Harter, John F R, 1993. "Differentiated Products with R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 19-28, March.
    5. Lambertini, Luca, 1997. "Unicity of the equilibrium in the unconstrained Hotelling model," Regional Science and Urban Economics, Elsevier, vol. 27(6), pages 785-798, November.
    6. Toshihiro Matsumura, 2003. "Stackelberg Mixed Duopoly with a Foreign Competitor," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 275-287, July.
    7. Anam Mahmudul & Basher Syed A & Chiang Shin-Hwan, 2007. "Mixed Oligopoly under Demand Uncertainty," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-26, June.
    8. Anderson, Simon P & Engers, Maxim, 1994. "Strategic Investment and Timing of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 833-853, November.
    9. Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
    10. Mehmet Demirbag & Keith W. Glaister, 2010. "Factors Determining Offshore Location Choice for R&D Projects: A Comparative Study of Developed and Emerging Regions," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1534-1560, December.
    11. Bonein, Aurélie & Turolla, Stéphane, 2009. "Sequential location under one-sided demand uncertainty," Research in Economics, Elsevier, vol. 63(3), pages 145-159, September.
    12. Koji Ishibashi & Toyokazu Kaneko, 2008. "Partial privatization in mixed duopoly with price and quality competition," Journal of Economics, Springer, vol. 95(3), pages 213-231, December.
    13. Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1991. "Mixed oligopoly with differentiated products," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 43-53, March.
    14. Aurélie Bonein & Stéphane Turolla, 2009. "Sequential location under one-sided demand uncertainty," Post-Print hal-02387376, HAL.
    15. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    16. Meza, Sergio & Tombak, Mihkel, 2009. "Endogenous location leadership," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 687-707, November.
    17. Pal, Debashis, 1991. "Cournot duopoly with two production periods and cost differentials," Journal of Economic Theory, Elsevier, vol. 55(2), pages 441-448, December.
    18. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    19. Mai, Chao-cheng & Peng, Shin-kun, 1999. "Cooperation vs. competition in a spatial model," Regional Science and Urban Economics, Elsevier, vol. 29(4), pages 463-472, July.
    20. Toshihiro Matsumura & Noriaki Matsushima, 2003. "Mixed Duopoly with Product Differentiation: Sequential Choice of Location," Australian Economic Papers, Wiley Blackwell, vol. 42(1), pages 18-34, March.
    21. Sadanand, Asha & Sadanand, Venkatraman, 1996. "Firm Scale and the Endogenous Timing of Entry: a Choice between Commitment and Flexibility," Journal of Economic Theory, Elsevier, vol. 70(2), pages 516-530, August.
    22. Neven, Damien, 1985. "Two Stage (Perfect) Equilibrium in Hotelling's Model," Journal of Industrial Economics, Wiley Blackwell, vol. 33(3), pages 317-325, March.
    23. Kieron Meagher & Klaus Zauner, 2005. "Location-then-price competition with uncertain consumer tastes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 25(4), pages 799-818, June.
    24. Giovanni Maggi, 1996. "Endogenous Leadership in a New Market," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 641-659, Winter.
    25. Boyan Jovanovic, 1981. "Entry With Private Information," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 649-660, Autumn.
    26. Meagher, Kieron J. & Zauner, Klaus G., 2004. "Product differentiation and location decisions under demand uncertainty," Journal of Economic Theory, Elsevier, vol. 117(2), pages 201-216, August.
    27. Toshihiro Matsumura & Noriaki Matsushima, 2004. "Endogenous Cost Differentials between Public and Private Enterprises: A Mixed Duopoly Approach," Economica, London School of Economics and Political Science, vol. 71(284), pages 671-688, November.
    28. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer.
    29. Strange, William & Hejazi, Walid & Tang, Jianmin, 2006. "The uncertain city: Competitive instability, skills, innovation and the strategy of agglomeration," Journal of Urban Economics, Elsevier, vol. 59(3), pages 331-351, May.
    30. Piga, Claudio & Poyago-Theotoky, Joanna, 2005. "Endogenous R&D spillovers and locational choice," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 127-139, March.
    31. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    32. F. Javier Casado-Izaga, 2000. "Location decisions: The role of uncertainty about consumer tastes," Journal of Economics, Springer, vol. 71(1), pages 31-46, February.
    33. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Armel Jacques, 2022. "Endogenous timing of technological choices of flexibility in a mixed duopoly," TEPP Working Paper 2022-04, TEPP.
    2. Shuxiao Sun & Xiaona Zheng & Huaqing Hu & Tao Huang, 2023. "Spatial competition and social welfare considering different feasible location regions," Journal of Economics, Springer, vol. 138(1), pages 17-50, January.
    3. Xu, Lili & Matsumura, Toshihiro, 2023. "Market transparency in a mixed oligopoly," MPRA Paper 118415, University Library of Munich, Germany.
    4. Young Kwark & Jianqing Chen & Srinivasan Raghunathan, 2018. "User-Generated Content and Competing Firms’ Product Design," Management Science, INFORMS, vol. 64(10), pages 4608-4628, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Changying & Zhang, Jianhu, 2011. "Equilibrium locations in a mixed duopoly with sequential entry in real time," Economic Modelling, Elsevier, vol. 28(3), pages 1211-1218, May.
    2. Jianhu Zhang & Changying Li, 2013. "Endogenous R&D spillover and location choice in a mixed oligopoly," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(2), pages 459-477, October.
    3. Aurélie Bonein & Stéphane Turolla, 2023. "Spatial competition with demand uncertainty: A laboratory experiment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(4), pages 906-939, October.
    4. Toshihiro Matsumura & Noriaki Matsushima, 2010. "Patent licensing, bargaining, and product positioning," ISER Discussion Paper 0775, Institute of Social and Economic Research, Osaka University.
    5. Kumar, Ashutosh & Saha, Bibhas, 2008. "Spatial competition in a mixed duopoly with one partially nationalized firm," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 326-341, June.
    6. Kangsik Choi & Yuanzhu Lu, 2009. "A Model Of Endogenous Payoff Motives And Endogenous Timing In A Mixed Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 48(3), pages 203-223, September.
    7. Bonein, Aurélie & Turolla, Stéphane, 2009. "Sequential location under one-sided demand uncertainty," Research in Economics, Elsevier, vol. 63(3), pages 145-159, September.
    8. Matsushima, Noriaki & Matsumura, Toshihiro, 2006. "Mixed oligopoly, foreign firms, and location choice," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 753-772, November.
    9. Yang, Xiaodong & Cai, Gangshu (George) & Chen, Ying-Ju & Yang, Shu-Jung Sunny, 2017. "Competitive Retailer Strategies for New Market Research, Entry and Positioning Decisions," Journal of Retailing, Elsevier, vol. 93(2), pages 172-186.
    10. Toshihiro Matsumura, 2003. "Endogenous Role in Mixed Markets: A Two‐Production‐Period Model," Southern Economic Journal, John Wiley & Sons, vol. 70(2), pages 403-413, October.
    11. Toshihiro Matsumura & Noriaki Matsushima & Ikuo Ishibashi, 2009. "Privatization and entries of foreign enterprises in a differentiated industry," Journal of Economics, Springer, vol. 98(3), pages 203-219, December.
    12. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    13. Inoue, Tomohiro & Kamijo, Yoshio & Tomaru, Yoshihiro, 2009. "Interregional mixed duopoly," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 233-242, March.
    14. Toshihiro Matsumura & Akira Ogawa, 2010. "On The Robustness Of Private Leadership In Mixed Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 49(2), pages 149-160, June.
    15. Hiroaki Ino & Toshihiro Matsumura, 2010. "What role should public enterprises play in free-entry markets?," Journal of Economics, Springer, vol. 101(3), pages 213-230, November.
    16. Krol Michal, 2011. "On the Existence and Social Optimality of Equilibria in a Hotelling Game with Uncertain Demand and Linear-Quadratic Costs," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-22, March.
    17. Tamás Balogh & Attila Tasnádi, 2012. "Does timing of decisions in a mixed duopoly matter?," Journal of Economics, Springer, vol. 106(3), pages 233-249, July.
    18. Levin, Mark (Левин, Марк) & Matrosova, K. (Матросова, К.), 2016. "Research, Modeling and Process Management Dissemination of Innovations in Socio-Economic Systems [Исследование, Моделирование И Управление Процессами Распространения Инноваций В Социально-Экономиче," Working Papers 1443, Russian Presidential Academy of National Economy and Public Administration.
    19. Meagher, Kieron J. & Wong, Arlene & Zauner, Klaus G., 2020. "A competitive analysis of fail fast: Shakeout and uncertainty about consumer tastes," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 589-600.
    20. Stefan Lutz & Mario Pezzino, 2010. "Mixed oligopoly, vertical product differentiation and fixed qualitydependent costs," Economics Discussion Paper Series 1015, Economics, The University of Manchester.

    More about this item

    Keywords

    Endogenous timing; Mixed oligopoly; Demand uncertainty; Horizontal differentiation; C72; D43; D81; L13; R30; H42;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:108:y:2013:i:3:p:273-289. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.