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The Choice of Capacity in Mixed Duopoly under Demand Uncertainty

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  • Yuanzhu Lu
  • Sougata Poddar

    (Department of Economics, National University of Singapore)

Abstract

We analyze the capacity choice of firms under demand uncertainty in a mixed duopoly market consisting of one private firm and one public firm. We define a two-stage game where firms choose capacity in the first stage without knowing which state of Nature is going to be realized, and output in the second stage knowing which state is realized. We address the question of maintaining over and under capacity in the equilibrium as a strategic device; and show that both symmetric and asymmetric outcomes can be realized.

Suggested Citation

  • Yuanzhu Lu & Sougata Poddar, 2004. "The Choice of Capacity in Mixed Duopoly under Demand Uncertainty," CEMA Working Papers 507, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:507
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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    Cited by:

    1. 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.
    2. Guangliang Ye, 2012. "Patent Licensing in a Mixed Oligopoly with a Foreign Firm," Economics Bulletin, AccessEcon, vol. 32(2), pages 1191-1197.
    3. Yoshihiro Tomaru & Yasuhiko Nakamura & Masayuki Saito, 2009. "Capacity Choice in a Mixed Duopoly with Managerial Delegation," Economics Bulletin, AccessEcon, vol. 29(3), pages 1904-1924.
    4. Yuanzhu Lu, 2006. "Endogenous Timing in a Mixed Oligopoly with Foreign Competitors: the Linear Demand Case," Journal of Economics, Springer, vol. 88(1), pages 49-68, June.
    5. Maria Teresa TRENTINAGLIA DE DAVERIO, 2013. "Country-specific rigidities and investment decisions: quantity competition and demand uncertainty," Departmental Working Papers 2013-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano, revised 02 Jul 2014.
    6. Luciano Fanti & Nicola Meccheri, 2017. "Unionization Regimes, Capacity Choice by Firms and Welfare Outcomes," Manchester School, University of Manchester, vol. 85(6), pages 661-681, December.
    7. 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.
    8. Hikaru Ogawa, 2006. "Capacity Choice in the Mixed duopoly with Product Differentiation," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-6.
    9. Nakamura, Yasuhiko, 2014. "Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 105-117.
    10. Pu‐yan Nie & Yong‐cong Yang, 2020. "Cost‐reduction innovation under mixed economy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1195-1201, October.
    11. Kangsik Choi & DongJoon Lee, 2020. "Do firms choose overcapacity or undercapacity in a vertical structure?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 839-847, July.
    12. 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.
    13. Toshihiro Matsumura & Daisuke Shimizu, 2010. "Privatization Waves," Manchester School, University of Manchester, vol. 78(6), pages 609-625, December.
    14. Kangsik, Choi, 2008. "Cournot-Bertrand competition in a unionized mixed duopoly," MPRA Paper 12787, University Library of Munich, Germany, revised 26 Dec 2008.
    15. Pu-yan Nie, 2014. "Effects of capacity constraints on mixed duopoly," Journal of Economics, Springer, vol. 112(3), pages 283-294, July.
    16. Yasuo Sanjo, 2009. "Quality choice in a health care market: a mixed duopoly approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 10(2), pages 207-215, May.
    17. Choi, Kangsik, 2008. "Comparing Cournot and Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 15468, University Library of Munich, Germany, revised 27 May 2009.
    18. HIGASHIDA Keisaku, 2018. "Subsidies to Public Firms and Competition Modes under a Mixed Duopoly," Discussion papers 18001, Research Institute of Economy, Trade and Industry (RIETI).
    19. Choi, Kangsik, 2010. "Strategic Budget Constraints of Public Firm under Bertrand Competition of Unionized Mixed Duopoly," MPRA Paper 19969, University Library of Munich, Germany.

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