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

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  • Yuanzhu Lu

    ()
    (China Economics and Management Academy, Central University of Finance and Economics)

  • Sougata Poddar

    ()
    (Department of Economics, National University of Singapore)

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:nus:nusewp:wp0605

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Keywords: Endogenous timing; public firm; private firm; over capacity; under capacity;

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  1. de Palma, André & Thisse, Jacques-François, 1995. "Privatization and Efficiency in a Differentiated Industry," CEPR Discussion Papers 1136, C.E.P.R. Discussion Papers.
  2. Lu, Yuanzhu & Poddar, Sougata, 2005. "Mixed oligopoly and the choice of capacity," Research in Economics, Elsevier, vol. 59(4), pages 365-374, December.
  3. 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.
  4. Hamilton, J.H. & Slutsky, S.M., 1988. "Endogenous Timing In Duopoly Games: Stackelberg Or Cournot Equilibria," Papers 88-4, Florida - College of Business Administration.
  5. 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.
  6. Vives, Xavier, 1986. "Commitment, flexibility and market outcomes," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 217-229, June.
  7. 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.
  8. Cremer, H. & Marchand, M. & Thisse, J.-F., 1987. "The public firm as an instrument for regulating an oligopolistic market," CORE Discussion Papers 1987010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Yuanzhu Lu, 2005. "Endogenous Timing in a Mixed Oligopoly with Foreign Competitors: the Linear Demand Case," CEMA Working Papers 506, China Economics and Management Academy, Central University of Finance and Economics.
  10. 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.
  11. Robson, Arthur J, 1990. "Stackelberg and Marshall," American Economic Review, American Economic Association, vol. 80(1), pages 69-82, March.
  12. Jacques, Armel, 2004. "Endogenous timing in a mixed oligopoly: a forgotten equilibrium," Economics Letters, Elsevier, vol. 83(2), pages 147-148, May.
  13. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
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Cited by:
  1. 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.

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