Endogenous Timing in a Mixed Duopoly and Private Duopoly - ‘Capacity- then-Quantity’ Game

Yuanzhu Lu () and Sougata Poddar ()

Departmental Working Papers from National University of Singapore, Department of Economics

Abstract: We consider a game of endogenous timing of sequential choice of capacity and quantity with observable delay in a mixed duopoly and a private duopoly under two possible time structures. In mixed duopoly, we find that a simultaneous play at the capacity stage or at the quantity stage can never be supported as subgame perfect Nash equilibrium (SPNE); whereas a simultaneous play at each stage turns out to be the unique SPNE in a private duopoly. In mixed duopoly there is multiplicity of equilibria and all SPNEs require sequentiality at the capacity as well as quantity stage. These equilibrium outcomes are invariant with respect to the endogenous time structures. In this context, we also show that the public firm never chooses over (excess) capacity in mixed duopoly, while the private firm never chooses under capacity in both mixed and private duopoly.

Keywords: Endogenous timing; public firm; private firm; over capacity; under capacity (search for similar items in EconPapers)
JEL-codes: L13 D43 H42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mic, nep-pbe and nep-sea
Date: 2006-12
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Persistent link: http://EconPapers.repec.org/RePEc:nus:nusewp:wp0605

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