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Capacity Choice in a Mixed Duopoly under Price Competition

Author

Listed:
  • Juan Carlos Barcena-Ruiz

    (Universidad del País Vasco)

  • María Begoña Garzón

    (Universidad del País Vasco)

Abstract

This paper shows that when firms compete on prices in a mixed duopoly, the public firm chooses over-capacity when products are substitutes and under-capacity when products are complements. The private firm always chooses under-capacity. This result is in contrast with that obtained in the literature assuming quantity competition.

Suggested Citation

  • Juan Carlos Barcena-Ruiz & María Begoña Garzón, 2007. "Capacity Choice in a Mixed Duopoly under Price Competition," Economics Bulletin, AccessEcon, vol. 12(26), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-07l30004
    as

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume12/EB-07L30004A.pdf
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    References listed on IDEAS

    as
    1. Anderson, Simon P. & de Palma, Andre & Thisse, Jacques-Francois, 1997. "Privatization and efficiency in a differentiated industry," European Economic Review, Elsevier, vol. 41(9), pages 1635-1654, December.
    2. Lu, Yuanzhu & Poddar, Sougata, 2005. "Mixed oligopoly and the choice of capacity," Research in Economics, Elsevier, vol. 59(4), pages 365-374, December.
    3. Hikaru Ogawa, 2006. "Capacity Choice in the Mixed duopoly with Product Differentiation," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-6.
    4. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    5. Hikaru Ogawa & Akira Nishimori, 2004. "Do Firms Always Choose Excess Capacity?," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
    6. Wen, Mei & Sasaki, Dan, 2001. "Would Excess Capacity in Public Firms Be Socially Optimal?," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 283-290, September.
    7. repec:ebl:ecbull:v:12:y:2006:i:8:p:1-6 is not listed on IDEAS
    8. Juan Bárcena-Ruiz, 2007. "Endogenous Timing in a Mixed Duopoly: Price Competition," Journal of Economics, Springer, vol. 91(3), pages 263-272, July.
    9. repec:ebl:ecbull:v:12:y:2004:i:2:p:1-7 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kazuhiro Ohnishi, 2020. "Price-setting mixed duopoly, subsidization and the order of firms' moves: the relevance of privatization," Economics Bulletin, AccessEcon, vol. 40(4), pages 3071-3076.
    2. Ohnishi, Kazuhiro, 2020. "Price-setting mixed duopoly, partial privatisation and subsidisation," MPRA Paper 104063, University Library of Munich, Germany.
    3. Kazuhiro Ohnishi, 2013. "A Two-production-period Model with State-owned and Labour-managed Firms," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 5(1), pages 41-56, April.
    4. Nakamura, Yasuhiko, 2014. "Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 105-117.
    5. Nakamura, Yasuhiko, 2015. "Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 262-277.
    6. Kazuhiro Ohnishi, 2022. "Lifetime Employment and Stackelberg Mixed Duopoly Games with a Foreign Labour-Managed Competitor," Arthaniti: Journal of Economic Theory and Practice, , vol. 21(1), pages 27-42, June.
    7. Ohnishi, Kazuhiro, 2020. "Price-setting mixed duopoly, subsidization and the order of firms' moves: the relevance of privatization," MPRA Paper 102847, University Library of Munich, Germany.
    8. Kangsik Choi & DongJoon Lee, 2020. "Do firms choose overcapacity or undercapacity in a vertical structure?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 839-847, July.

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    More about this item

    Keywords

    Heterogeneous Products;

    JEL classification:

    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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