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Capacity Choice in a Mixed Duopoly with Managerial Delegation

Listed author(s):
  • Yoshihiro Tomaru

    ()

    (Faculty of Economics, Toyo University)

  • Yasuhiko Nakamura

    ()

    (Graduate School of Economics, Waseda University)

  • Masayuki Saito

    ()

    (Graduate School of Economics, Waseda University)

This paper studies capacity choice in a mixed duopoly with differentiated goods under quantity competition and price competition, taking into account the separation between ownership and management. In this paper, we show that in equilibrium, under quantity competition, both the public firm and the private firm choose over capacity, while under price competition, both choose under capacity. Moreover, in both the competition types, we found that the results do not depend on the degree of product differentiation. Furthermore, under both the competition types, we conduct detailed analysis of each firm`s delegation parameter of managerial contract, and we compare the equilibrium market outcomes obtained in our model with those in the entrepreneurial case, which is considered in several existing literature, and those in the private duopolistic case, which corresponds to the one after privatization of the public firm.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I3-P39.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 3 ()
Pages: 1904-1924

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Handle: RePEc:ebl:ecbull:eb-09-00277
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  1. Yuanzhu Lu & Sougata Poddar, 2006. "The Choice Of Capacity In Mixed Duopoly Under Demand Uncertainty," Manchester School, University of Manchester, vol. 74(3), pages 266-272, 06.
  2. Luca Lambertini, 2000. "Extended Games Played by Managerial Firms," The Japanese Economic Review, Japanese Economic Association, vol. 51(2), pages 274-283, June.
  3. Hikaru Ogawa & Akira Nishimori, 2004. "Do Firms Always Choose Excess Capacity?," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
  4. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
  5. Yuanzhu Lu & Sougata Poddar, 2006. "Endogenous Timing in a Mixed Duopoly and Private Duopoly - ‘Capacity- then-Quantity’ Game," Departmental Working Papers wp0605, National University of Singapore, Department of Economics.
  6. repec:ebl:ecbull:v:12:y:2006:i:8:p:1-6 is not listed on IDEAS
  7. Vives, Xavier, 1986. "Commitment, flexibility and market outcomes," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 217-229, June.
  8. Barros, Fatima, 1995. "Incentive schemes as strategic variables: An application to a mixed duopoly," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 373-386, September.
  9. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
  10. repec:ebl:ecbull:v:12:y:2007:i:27:p:1-7 is not listed on IDEAS
  11. Junsen Zhang, 1993. "Holding Excess Capacity to Deter Entry in a Labour-Managed Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 222-234, February.
  12. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
  13. repec:ebl:ecbull:v:12:y:2004:i:2:p:1-7 is not listed on IDEAS
  14. Lu, Yuanzhu & Poddar, Sougata, 2005. "Mixed oligopoly and the choice of capacity," Research in Economics, Elsevier, vol. 59(4), pages 365-374, December.
  15. Hikaru Ogawa, 2006. "Capacity Choice in the Mixed duopoly with Product Differentiation," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-6.
  16. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  17. John S. Heywood & Guangliang Ye, 2009. "Delegation in a mixed oligopoly: the case of multiple private firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 71-82.
  18. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  19. White, Mark D., 2001. "Managerial incentives and the decision to hire managers in markets with public and private firms," European Journal of Political Economy, Elsevier, vol. 17(4), pages 877-896, November.
  20. Shoji Haruna, 1996. "A Note on Holding Excess Capacity to Deter Entry in a Labour-Managed Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 29(2), pages 493-499, May.
  21. Yasuhiko Nakamura & Tomohiro Inoue, 2009. "Endogenous timing in a mixed duopoly: price competition with managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 325-333.
  22. Stewart, Geoff, 1991. "Strategic Entry Interactions Involving Profit-Maximising and Labour-Managed Firms," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 570-583, October.
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