IDEAS home Printed from https://ideas.repec.org/a/spr/anresc/v69y2022i2d10.1007_s00168-022-01144-8.html
   My bibliography  Save this article

Mixed duopoly under hotelling with convex production costs

Author

Listed:
  • John S. Heywood

    (University of Wisconsin-Milwaukee)

  • Dongyang Li

    (Renmin University of China)

  • Guangliang Ye

    (Hainan University)

Abstract

Dragone and Lambertini (Reg Sci Urban Econ 84:103568, 2020) show that in a Hotelling duopoly with linear transport cost, sufficiently convex production cost generates an elevated price equilibrium with collocation at the middle. We examine the consequences of a mixed duopoly under these cost assumptions. No equilibrium exists in a mixed duopoly with simultaneous location. Equilibria exist under location leadership. Private firm leadership generates greater welfare than public firm leadership, a result different from previous examinations. A mixed duopoly with a foreign firm generates an equilibrium with firms usually located apart but with the public firm serving all interior customers. This typically increases welfare relative to the fully private market.

Suggested Citation

  • John S. Heywood & Dongyang Li & Guangliang Ye, 2022. "Mixed duopoly under hotelling with convex production costs," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(2), pages 487-510, October.
    • Handle: RePEc:spr:anresc:v:69:y:2022:i:2:d:10.1007_s00168-022-01144-8
    DOI: 10.1007/s00168-022-01144-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00168-022-01144-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00168-022-01144-8?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. Toshihiro Matsumura & Makoto Okamura, 2015. "Competition and privatization policies revisited: the payoff interdependence approach," Journal of Economics, Springer, vol. 116(2), pages 137-150, October.
    2. Osborne, Martin J & Pitchik, Carolyn, 1987. "Equilibrium in Hotelling's Model of Spatial Competition," Econometrica, Econometric Society, vol. 55(4), pages 911-922, July.
    3. 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.
    4. Ramcharran, Harri, 2011. "The pharmaceutical industry of Puerto Rico: Ramifications of global competition," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 395-406, May.
    5. S. T. Boris Choy & Adrian F. M. Smith, 1997. "On Robust Analysis of a Normal Location Parameter," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 59(2), pages 463-474.
    6. Simon Loertscher & Gerd Muehlheusser, 2011. "Sequential location games," RAND Journal of Economics, RAND Corporation, vol. 42(4), pages 639-663, December.
    7. Matsumura, Toshihiro, 2012. "Welfare consequence of an asymmetric regulation in a mixed Bertrand duopoly," Economics Letters, Elsevier, vol. 115(1), pages 94-96.
    8. Tai‐Hsin Huang & Mei‐Hui Wang, 2001. "Estimating Scale and Scope Economies with Fourier Flexible Functional Form – Evidence from Taiwan's Banking Industry," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 213-231, June.
    9. Gupta, Barnali, 1992. "Sequential entry and deterrence with competitive spatial price discrimination," Economics Letters, Elsevier, vol. 38(4), pages 487-490, April.
    10. Assaf, A., 2010. "Bootstrapped scale efficiency measures of UK airports," Journal of Air Transport Management, Elsevier, vol. 16(1), pages 42-44.
    11. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    12. Hoel, Michael, 1997. " Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-259, June.
    13. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    14. Heywood, John S. & Ye, Guangliang, 2009. "Mixed oligopoly and spatial price discrimination with foreign firms," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 592-601, September.
    15. Huang, Tai-Hsin & Wang, Mei-Hui, 2001. "Estimating Scale and Scope Economies with Fourier Flexible Functional Form--Evidence from Taiwan's Banking Industry," Australian Economic Papers, Wiley Blackwell, vol. 40(2), pages 213-231, June.
    16. 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.
    17. Lederer, Phillip J & Hurter, Arthur P, Jr, 1986. "Competition of Firms: Discriminatory Pricing and Location," Econometrica, Econometric Society, vol. 54(3), pages 623-640, May.
    18. Toshihiro Matsumura & Noriaki Matsushima, 2009. "Cost differentials and mixed strategy equilibria in a Hotelling model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 215-234, March.
    19. Noriaki Matsushima & Toshihiro Matsumura, 2003. "Mixed oligopoly and spatial agglomeration," Canadian Journal of Economics, Canadian Economics Association, vol. 36(1), pages 62-87, February.
    20. Kai Andree & John S. Heywood & Mike Schwan & Zheng Wang, 2018. "A Spatial Model Of Cartel Stability: The Influence Of Production Cost Convexity," Bulletin of Economic Research, Wiley Blackwell, vol. 70(3), pages 298-311, July.
    21. Kenneth Fjell & Debashis Pal, 1996. "A Mixed Oligopoly in the Presence of Foreign Private Firms," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 737-743, August.
    22. Gupta, Barnali, 1994. "Competitive spatial price discrimination with strictly convex production costs," Regional Science and Urban Economics, Elsevier, vol. 24(2), pages 265-272, April.
    23. Michael Hoel, 1997. "Environmental Policy with Endogenous Plant Locations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 241-259, June.
    24. Nobuyuki Harada, 2004. "Productivity and Entrepreneurial Chraracteristics in New Japanese Firms," Small Business Economics, Springer, vol. 23(4), pages 299-310, November.
    25. 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.
    26. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    27. Economides, Nicholas, 1986. "Minimal and maximal product differentiation in Hotelling's duopoly," Economics Letters, Elsevier, vol. 21(1), pages 67-71.
    28. Dimitrios Xefteris, 2013. "Hotelling was Right," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 706-712, December.
    29. Anderson, Simon P. & Goeree, Jacob K. & Ramer, Roald, 1997. "Location, Location, Location," Journal of Economic Theory, Elsevier, vol. 77(1), pages 102-127, November.
    30. Wen-Jen Hsieh, 1995. "Test of variable output and scale elasticities for 20 US manufacturing industries," Applied Economics Letters, Taylor & Francis Journals, vol. 2(8), pages 284-287.
    31. 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.
    32. Junichi Haraguchi & Toshihiro Matsumura, 2021. "Profit‐enhancing entries in mixed oligopolies," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 33-55, July.
    33. Neven, Damien J., 1987. "Endogenous sequential entry in a spatial model," International Journal of Industrial Organization, Elsevier, vol. 5(4), pages 419-434.
    34. 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.
    35. de Fraja, Giovanni & Delbono, Flavio, 1990. "Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
    36. Dragone, Davide & Lambertini, Luca, 2020. "Equilibrium existence in the Hotelling model with convex production costs," Regional Science and Urban Economics, Elsevier, vol. 84(C).
    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. Park, Junseok & Moon, Ilkyeong, 2023. "A facility location problem in a mixed duopoly on networks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).

    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. Ralph Braid, 2013. "The locations of firms on intersecting roadways," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 791-808, June.
    2. Gabriel Courey, 2018. "Spatial price discrimination, sequential location and convex production costs," Letters in Spatial and Resource Sciences, Springer, vol. 11(2), pages 223-232, July.
    3. Dragone, Davide & Lambertini, Luca, 2020. "Equilibrium existence in the Hotelling model with convex production costs," Regional Science and Urban Economics, Elsevier, vol. 84(C).
    4. Hongkun Ma & X. Henry Wang & Chenhang Zeng, 2021. "Location choice and costly product differentiation in a mixed duopoly," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 66(1), pages 137-159, February.
    5. Toshihiro Matsumura & Yoshihiro Tomaru, 2015. "Mixed duopoly, location choice, and shadow cost of public funds," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 416-429, October.
    6. Inoue, Tomohiro & Kamijo, Yoshio & Tomaru, Yoshihiro, 2009. "Interregional mixed duopoly," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 233-242, March.
    7. 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.
    8. 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.
    9. 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.
    10. Juan Carlos Bárcena-Ruiz & María Begoña Garzón, 2020. "Partial privatization in an international mixed oligopoly under product differentiation," Journal of Economics, Springer, vol. 131(1), pages 77-100, September.
    11. Heywood, John S. & Ye, Guangliang, 2009. "Mixed oligopoly and spatial price discrimination with foreign firms," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 592-601, September.
    12. 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.
    13. Juan Bárcena Ruiz & F. Casado-Izaga & Hamid Hamoudi, 2014. "Optimal zoning of a mixed duopoly," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 141-153, January.
    14. Hong Feng & Jie Ma, 2018. "Location choices and third‐degree spatial price discrimination," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(2), pages 142-153, May.
    15. Kenji Fujiwara, 2007. "Partial Privatization in a Differentiated Mixed Oligopoly," Journal of Economics, Springer, vol. 92(1), pages 51-65, September.
    16. Ishida, Junichiro & Matsushima, Noriaki, 2009. "Should civil servants be restricted in wage bargaining? A mixed-duopoly approach," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 634-646, April.
    17. Lyu, Yuanzhen & Shuai, Jie, 2017. "Mixed duopoly with foreign firm and subcontracting," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 58-68.
    18. 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.
    19. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
    20. 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.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

    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:spr:anresc:v:69:y:2022:i:2:d:10.1007_s00168-022-01144-8. 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.