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Capacity choice in a mixed duopoly with a foreign competitor

Jorge Fernández-Ruiz

Economics Bulletin, 2012, vol. 32, issue 3, 2653-2661

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.

Keywords: Mixed Oligopoly; Capacity Choice; Foreign Firm; Public Firm (search for similar items in EconPapers)
JEL-codes: L1 L3 (search for similar items in EconPapers)
Date: 2012-09-25
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