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Capacity choice in an international mixed triopoly

Kazuhiro Ohnishi

No e140, Working Papers from Tokyo Center for Economic Research

Abstract: This paper considers a mixed triopoly model where a state-owned firm, a domestic labor-managed firm and a foreign capitalist firm are allowed to pre-install capacity as a strategic commitment device. First, each firm simultaneously and independently chooses its capacity level. None of the firms can reduce or dispose of capacity. Second, each firm simultaneously and independently chooses its output level. The paper shows that there is an equilibrium solution where only the domestic labor-managed firm pre-installs excess capacity as a strategic commitment device.

Pages: 23 pages
Date: 2019-10
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