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Cournot and Bertrand competition with asymmetric costs in a mixed duopoly revisited

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  • Kangsik, Choi

Abstract

We investigate a differentiated mixed duopoly in which private and public firms can choose to strategically set prices or quantities when the public firm is less efficient than the private firm. Thus, if the Singh and Vives assumption of positive primary outputs holds, (i) Bertrand competition or quantity-price competition can occur depending on the degree of public firm's inefficiency when the goods are substitutes. (ii) regardless of its inefficiency, there can be always sustained Bertrand competition when the goods are complements. (iii) the ranking of a private firm's profit is not reversed. However if we relax the parameter restriction imposed implicitly by Singh and Vives (i.e., we adopt Zanchettin (2006) assumption) to allow for a wider range of cost asymmetry, there can be always sustained multiple subgame Nash perfect equilibria in the contract stage by each critical value of the public firm's inefficiency. In particular, Cournot and Bertrand competition coexist if its inefficiency is sufficiently small or large.

Suggested Citation

  • Kangsik, Choi, 2012. "Cournot and Bertrand competition with asymmetric costs in a mixed duopoly revisited," MPRA Paper 37704, University Library of Munich, Germany, revised 28 Mar 2012.
  • Handle: RePEc:pra:mprapa:37704
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    References listed on IDEAS

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    Cited by:

    1. Chatterjee, Susmita & Chattopadhyay, Srobonti & Chatterjee, Rittwik & Dutta, Debabrata, 2017. "Public Firm in Mixed Oligopolistic Structure: A Theoretical Exposition," MPRA Paper 80073, University Library of Munich, Germany, revised 15 May 2017.

    More about this item

    Keywords

    Inefficiency; Cournot-Bertrand Competition; Mixed Duopoly;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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