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Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities

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  • André De Palma
  • Luc Leruth

Abstract

We consider the case of a duopoly selling perfect substitutes except for their level of capacity. Firms are playing a two-stage game in which they take capacities as given when they play in prices and anticipate the price outcome when they play in capacities. We analyze the case where consumers are homogeneous and where they are differentiated in their willingness to pay to avoid congestion.

Suggested Citation

  • André De Palma & Luc Leruth, 1989. "Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities," Annals of Economics and Statistics, GENES, issue 15-16, pages 389-407.
  • Handle: RePEc:adr:anecst:y:1989:i:15-16:p:389-407
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    File URL: http://www.jstor.org/stable/20075765
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    Cited by:

    1. Borger Bruno De & Dunkerley Fay & Proost Stef, 2008. "The Interaction between Tolls and Capacity Investment in Serial and Parallel Transport Networks," Review of Network Economics, De Gruyter, vol. 7(1), pages 1-23, March.
    2. de Palma, André & Ordás Criado, Carlos & Randrianarisoa, Laingo M., 2018. "When Hotelling meets Vickrey. Service timing and spatial asymmetry in the airline industry," Journal of Urban Economics, Elsevier, vol. 105(C), pages 88-106.
    3. De Borger, Bruno & Proost, Stef, 2012. "Transport policy competition between governments: A selective survey of the literature," Economics of Transportation, Elsevier, vol. 1(1), pages 35-48.
    4. Basso, Leonardo J. & Zhang, Anming, 2007. "Congestible facility rivalry in vertical structures," Journal of Urban Economics, Elsevier, vol. 61(2), pages 218-237, March.
    5. Fay Dunkerley & Andre De Palma & Stef Proost, 2009. "Spatial Asymmetric Duopoly With An Application To Brussels' Airports," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 529-553, August.
    6. Zhang, Zhongju & Dey, Debabrata & Tan, Yong, 2008. "Price and QoS competition in data communication services," European Journal of Operational Research, Elsevier, vol. 187(3), pages 871-886, June.
    7. Aloui, Chokri & Jebsi, Khaïreddine, 2016. "Platform optimal capacity sharing: Willing to pay more does not guarantee a larger capacity share," Economic Modelling, Elsevier, vol. 54(C), pages 276-288.

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