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Endogenous Timing in a Mixed Duopoly and Private Duopoly - ‘Capacity- then-Quantity’ Game

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Author Info
Yuanzhu Lu () (China Economics and Management Academy, Central University of Finance and Economics)
Sougata Poddar () (Department of Economics, National University of Singapore)

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Abstract

We consider a game of endogenous timing of sequential choice of capacity and quantity with observable delay in a mixed duopoly and a private duopoly under two possible time structures. In mixed duopoly, we find that a simultaneous play at the capacity stage or at the quantity stage can never be supported as subgame perfect Nash equilibrium (SPNE); whereas a simultaneous play at each stage turns out to be the unique SPNE in a private duopoly. In mixed duopoly there is multiplicity of equilibria and all SPNEs require sequentiality at the capacity as well as quantity stage. These equilibrium outcomes are invariant with respect to the endogenous time structures. In this context, we also show that the public firm never chooses over (excess) capacity in mixed duopoly, while the private firm never chooses under capacity in both mixed and private duopoly.

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Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0605.

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Length: 27 pages
Date of creation: Dec 2006
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Handle: RePEc:nus:nusewp:wp0605

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Related research
Keywords: Endogenous timing public firm private firm over capacity under capacity

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Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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  1. Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
  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. [Downloadable!] (restricted)
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  3. Lu, Yuanzhu & Poddar, Sougata, 2005. "Mixed oligopoly and the choice of capacity," Research in Economics, Elsevier, vol. 59(4), pages 365-374, December. [Downloadable!] (restricted)
  4. Jacques, Armel, 2004. "Endogenous timing in a mixed oligopoly: a forgotten equilibrium," Economics Letters, Elsevier, vol. 83(2), pages 147-148, May. [Downloadable!] (restricted)
  5. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1989. "The Public Firm as an Instrument for Regulating an Oligopolistic Market," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 283-301, April. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
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  9. 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 737-43, August. [Downloadable!] (restricted)
  10. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April. [Downloadable!] (restricted)
  11. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October. [Downloadable!] (restricted)
  12. Spencer, Barbara J. & Brander, James A., 1992. "Pre-commitment and flexibility : Applications to oligopoly theory," European Economic Review, Elsevier, vol. 36(8), pages 1601-1626, December. [Downloadable!] (restricted)
  13. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November. [Downloadable!] (restricted)
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