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Capacity choice in a mixed duopoly with a foreign competitor

Author

Listed:
  • Jorge Fernández-Ruiz

    (El Colegio de México)

Abstract

This paper analyzes a mixed duopoly in which a public firm and a (possibly partially) foreign-owned firm choose their capacity scales before competing in quantities. We show that the private firm chooses over-capacity, as in previous literature, except if it is completely foreign-owned. In this polar case, the private firm chooses the cost-minimizing capacity scale. We also show that the change in the nationality of the private firm does not essentially alter the public firm's choice, since this firm chooses under-capacity if products are substitutes and over-capacity if they are complements, just as it does when it faces a domestic competitor.

Suggested Citation

  • Jorge Fernández-Ruiz, 2012. "Capacity choice in a mixed duopoly with a foreign competitor," Economics Bulletin, AccessEcon, vol. 32(3), pages 2653-2661.
    • Handle: RePEc:ebl:ecbull:eb-12-00445
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I3-P255.pdf
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    References listed on IDEAS

    as
    1. Hikaru Ogawa & Akira Nishimori, 2004. "Do Firms Always Choose Excess Capacity?," Economics Bulletin, AccessEcon, vol. 12(2), pages 1-7.
    2. Hikaru Ogawa, 2006. "Capacity Choice in the Mixed duopoly with Product Differentiation," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-6.
    3. repec:bla:ecorec:v:77:y:2001:i:238:p:283-90 is not listed on IDEAS
    4. Hikaru Ogawa & Yasuo Sanjo, 2007. "Location Of Public Firm In The Presence Of Multinational Firm: A Mixed Duopoly Approach," Australian Economic Papers, Wiley Blackwell, vol. 46(2), pages 191-203, June.
    5. Wang, Leonard F.S. & Chen, Tai-Liang, 2011. "Mixed oligopoly, optimal privatization, and foreign penetration," Economic Modelling, Elsevier, vol. 28(4), pages 1465-1470, July.
    6. Dave Furth & Dan Kovenock, 1993. "Price leadership in a duopoly with capacity constraints and product differentiation," Journal of Economics, Springer, vol. 57(1), pages 1-35, February.
    7. Lu, Yuanzhu & Poddar, Sougata, 2005. "Mixed oligopoly and the choice of capacity," Research in Economics, Elsevier, vol. 59(4), pages 365-374, December.
    8. Mei Wen & Dan Sasaki, 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Luciano Fanti & Nicola Meccheri, 2017. "Unionization Regimes, Capacity Choice by Firms and Welfare Outcomes," Manchester School, University of Manchester, vol. 85(6), pages 661-681, December.

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    More about this item

    Keywords

    Mixed Oligopoly; Capacity Choice; Foreign Firm; Public Firm;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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