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Mixed Duopoly with Subcontracting

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  • Jie Shuai

Abstract

Existing literature on mixed oligopoly focuses on competition among different types of firms but ignores their possible cooperation. We allow cooperation between a public firm and a private firm through subcontracting in a Hotelling mixed‐duopoly model. We find that when subcontracting is possible, the equilibrium without subcontracting is not socially optimal because subcontracting can lower total production costs. And if both firms engage in subcontracting, the existence of a public firm can guarantee the first best equilibrium, whether it is the low‐cost firm or not. But when a private firm is the low‐cost firm, it is more profitable for it to choose vertical foreclosure. And the consequent equilibrium is not socially desirable anymore. Copyright © 2014 John Wiley & Sons, Ltd.

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  • Jie Shuai, 2016. "Mixed Duopoly with Subcontracting," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(1), pages 37-49, January.
    • Handle: RePEc:wly:mgtdec:v:37:y:2016:i:1:p:37-49
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    Cited by:

    1. Lyu, Yuanzhen & Shuai, Jie, 2017. "Mixed duopoly with foreign firm and subcontracting," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 58-68.
    2. Jie Shuai, 2017. "Mixed Duopoly with a Partial-Delegated-Public Firm," Manchester School, University of Manchester, vol. 85(3), pages 339-356, June.
    3. Jie Shuai, 2017. "A comment on mixed oligopoly spatial model: the non-uniform consumer distribution," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 57-63, April.
    4. Chen Jingliang & Shuai Jie, 2019. "Privatizing Multi-subsidiary Public Firm in Location Model," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-14, January.

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