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Duopoly competitions with capacity constrained input

  • Nie, Pu-yan
  • Chen, You-hua

This paper focuses on the duopoly substitutability product with an upstream input subjected to capacity constraints. The effects of capacity constraints are captured. Combining competition effect with constraint effect, some interesting conclusions are reached. First, the relationship between capacity constraints and firm size is addressed. We argue that the capacity constraints reduce market size difference and price difference under Cournot. Second, under the Stackelberg case, the existence of solution is proved, and Stackelberg competitions enlarge firm-size difference and price difference if the more efficient firm plays the leading position. When the weaker firm plays the leading position, the conclusions depend on the total capacity. Finally, under the Stackelberg case, when the stronger firm plays the leading position, the firm-size difference and price difference decrease with total input under capacity constraints, which is contrary to the conclusions under Cournot competitions.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 5 ()
Pages: 1715-1721

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:5:p:1715-1721
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  5. Benjamin Lester, 2011. "Information and Prices with Capacity Constraints," American Economic Review, American Economic Association, vol. 101(4), pages 1591-1600, June.
  6. Arnold, Michael A. & Saliba, Christine, 2011. "Asymmetric capacity constraints and equilibrium price dispersion," Economics Letters, Elsevier, vol. 111(2), pages 158-160, May.
  7. Evans, Antony & Schäfer, Andreas, 2011. "The impact of airport capacity constraints on future growth in the US air transportation system," Journal of Air Transport Management, Elsevier, vol. 17(5), pages 288-295.
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  9. X. Wang & Bill Yang, 2010. "The sunk-cost effect and optimal two-part pricing," Journal of Economics, Springer, vol. 101(2), pages 133-148, October.
  10. Sacco, Dario & Schmutzler, Armin, 2011. "Is there a U-shaped relation between competition and investment?," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 65-73, January.
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