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Mixed Duopoly: Differential Game Approach

Koichi Futagami (), Toshihiro Matsumura () and Kizuku Takao ()
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Kizuku Takao: Aomori Public University

No 969, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: Previous studies in differential games reveal that intertemporal strategic behaviors have an important role for various economic problems. However, most of their analyses are limited to cases where objective functions are identical among agents. In this paper, we characterize the open-loop Nash equilibrium and the Markov perfect Nash equilibrium of a mixed duopoly game where a fully or partially state-owned firm and a fully private rm compete in the quantities of homogeneous goods with sticky prices. We show that in the Markov perfect Nash equilibrium, an increase in the governments' share-holdings of the state-owned firm has a non-monotonic effect on the price, and in a wide range of parameter spaces, it increases the price. These results are derived from the interaction of an asymmetric structure of agents' objectives and inter-temporal strategic behaviors, which are in sharp contrast with those in the open-loop Nash equilibrium. We provide new implications for privatization policies in the presence of dynamic interactions, against the static analyses.

Keywords: Mixed Duopoly; Open-loop Nash equilibrium; Markov Perfect Nash equilibrium (search for similar items in EconPapers)
JEL-codes: C73 D43 L32 (search for similar items in EconPapers)
Pages: 53pages
Date: 2017-04
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
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Journal Article: Mixed duopoly: Differential game approach (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:969

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