Capacity and Reaction Functions of Joint-Stock Firms

Kazuhiro Ohnishi

International Journal of Management, Accounting and Economics, 2016, vol. 3, issue 3, 166-173

Abstract: This paper investigates two-stage competition with two joint-stock firms. In the first stage, each firm independently chooses a level of capacity. In the second stage, each firm independently chooses an output. The paper shows that each firm’s reaction function has a kink at its installed capacity level. In addition, the paper considers interactions between a joint-stock incumbent and a potential joint-stock entrant as well as a pair of established joint-stock firms. The paper demonstrates that there exist cases in which the joint-stock incumbent can deter entry by the potential joint-stock entrant.

Keywords: Capacity; Joint-stock firm; Reaction function; entry (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:air:journl:v:3:y:2016:i:3:p:166

DOI: 10.5281/zenodo.17414356

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