TITLE

Capacity Choice in a Price-Setting Mixed Duopoly: The Relative Performance Approach

AUTHOR(S)
Yasuhiko Nakamura; Masayuki Saito
PUB. DATE
April 2013
SOURCE
Modern Economy;Apr2013, Vol. 4 Issue 4, p273
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper analyzes the capacity choice issue under a price-setting mixed duopoly with differentiated goods, when the objective function of the private firm is its relative profit. In this paper, we show that the public firm chooses over-capacity irrespective of the degree of product differentiation and the degree of importance of the relative performance of the private firm. In contrast, we find that the difference between the output and capacity levels of the private firm strictly depends on both the degree of product differentiation and the degree of importance of its relative performance. More precisely, the private firm chooses over-capacity when the degree of importance of its relative performance is high relative to the degree of product differentiation, whereas it chooses under-capacity otherwise.
ACCESSION #
89252776

 

Related Articles

  • Effects of capacity constraints on mixed duopoly. Nie, Pu-yan // Journal of Economics;Jul2014, Vol. 112 Issue 3, p283 

    This paper highlights the mixed duopoly substitutable product with an upstream input subject to capacity constraints. The effects of capacity constraints on the mixed economy are captured. Firstly, the degree of public ownership improves the firm size difference, the price difference, the price...

  • Price competition and quality differentiation with multiproduct firms. Cheng, Yi-Ling; Peng, Shin-Kun // Journal of Economics;Jul2014, Vol. 112 Issue 3, p207 

    This paper examines a two-stage competition where firms simultaneously choose the number of products and qualities in the first stage, and then compete in prices. It is shown that a monopolist must sell a single product. In addition, in any equilibrium of multiproduct duopoly, there are...

  • BUNDLING COMPETITION BETWEEN MULTI-PRODUCT AND SINGLE-PRODUCT FIRMS. JAE HYUN GWON // Journal of Economic Development;Sep2015, Vol. 40 Issue 3, p27 

    This paper analyzes a simple model where a multi-product firm competes with single-product firms possibly with bundling strategy. Mixed bundling is theoretically known as an effective business tool even in the symmetric competition as well as for the monopoly. Contrary to the literature, this...

  • Duopoly Pricing Under 'Private Knowledge' of Product Differentiation. Ulibarri, Carlos // Journal of Industry, Competition & Trade;Sep2012, Vol. 12 Issue 3, p265 

    This note studies price decisions in a duopoly industry where firms have private information over the degree of product differentiation (product-type). A Bayesian-Nash price solution is derived assuming firms maximize their 'certainty-equivalent' profit levels. The comparative-statics indicate...

  • COURNOT-NASH AND BERTRAND-NASH EQUILIBRIA FOR A HETEROGENEOUS DUOPOLY OF DIFFERENTIATED PRODUCTS. Gorbachuk, V. M. // Cybernetics & Systems Analysis;Jan2010, Vol. 46 Issue 1, p25 

    Under Cournot-Nash and Bertrand-Nash equilibria, analytical expressions are found for outputs, prices, and profits in the case when all duopoly parameters of differentiated products are different. It is shown that the signs of differences between such outputs, prices, and profits depend on the...

  • Price Leadership in a Duopoly With Capacity COnstraints and Product Differentiation. Furth, Dave; Kovenock, Dan // Journal of Economics;1993, Vol. 57 Issue 1, p1 

    This paper analyzes Stackelberg price leadership in a duopoly in which firms are capacity constrained and products are imperfect substitutes. Assuming symmetric substitutes, linear demand, and efficient rationing, we characterize the equilibria with an exogenously specified leader. Using the...

  • Capacity Choice in a Mixed Duopoly: The Relative Performance Approach. Yasuhiko Nakamura; Masayuki Saito // Theoretical Economics Letters;Apr2013, Vol. 3 Issue 2, p124 

    This paper studies capacity choice in a quantity-setting mixed duopoly with differentiated goods, when the objective function of the private firm is its relative profit. In this paper, we show that the differences between the output levels and capacity levels between both the public firm and the...

  • Optimal subsidy policy for accelerating the diffusion of green products. Hongguang Peng // Journal of Industrial Engineering & Management;Jun2013, Vol. 6 Issue 2, p626 

    Purpose: We consider a dynamic duopoly market in which two firms respectively produce green products and conventional products. The two types of product can substitute each other in some degree. Their demand rates depend on not only prices but the consumers' increasing environmental awareness....

  • Price Competition and Consumer Externalities in a Vertically Differentiated Duopoly with Information Disparities. Cavaliere, Alberto // Journal of Economics;Oct2005, Vol. 86 Issue 1, p29 

    In this paper, we extend the model of vertical product differentiation to consider information disparities about quality differences and their effects on price competition. If uninformed consumers overestimate vertical differentiation, asymmetric information is a source of market power and...

Share

Read the Article

Courtesy of THE LIBRARY OF VIRGINIA

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics