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Capacity choice with upstream investment

Author

Listed:
  • Qing Hu

    (Faculty of Economics, Kushiro Public University of Economics / Research Fellow, Graduate School of Economics, Kobe University)

  • Tomomichi Mizuno

    (Graduate School of Economics, Kobe University)

Abstract

We consider a vertically related market with an upstream firm engaging in cost-reducing investment and n downstream firms competing on quantity. We analyze the capacity choice by downstream firms and find that over-capacity occurs in equilibrium if the number of downstream firms is large or the upstream investment is efficient.

Suggested Citation

  • Qing Hu & Tomomichi Mizuno, 2022. "Capacity choice with upstream investment," Discussion Papers 2202, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:2202
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    References listed on IDEAS

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