Capacity choice with upstream investment

Qing Hu () and Tomomichi Mizuno
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Qing Hu: Faculty of Economics, Kushiro Public University of Economics / Research Fellow, Graduate School of Economics, Kobe University

No 2202, Discussion Papers from Graduate School of Economics, Kobe University

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 and find that over-capacity occurs in equilibrium if the number of downstream firms is large or the upstream investment is efficient.

Pages: 13 pages
Date: 2022-02
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-reg
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Journal Article: Capacity choice with upstream investment (2023)
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