Capacity choice with upstream investment

Qing Hu and Tomomichi Mizuno

Managerial and Decision Economics, 2023, vol. 44, issue 8, 4395-4403

Abstract: We consider a vertically related market with an upstream firm engaging in cost‐reducing investment and n downstream firms competing on quantity. We analyze the capacity choice by downstream firms. We find that input price decreases with production capacity if many downstream firms exist or the investment is efficient. More importantly, in the previous research, it is shown that the duopolistic downstream firms always choose undercapacity in a vertical market with an upstream firm. However, we find that overcapacity occurs in equilibrium if the number of downstream firms is large or the upstream investment is efficient.

Date: 2023
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/mde.3956

Related works:
Working Paper: Capacity choice with upstream investment (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:44:y:2023:i:8:p:4395-4403

Access Statistics for this article

Managerial and Decision Economics is currently edited by Antony Dnes

More articles in Managerial and Decision Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().