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Strategic delegation in spatial price discrimination mixed duopoly; Nash is consistent at the presence of a public firm

Michelacakis, Nickolas (2021): Strategic delegation in spatial price discrimination mixed duopoly; Nash is consistent at the presence of a public firm.

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Abstract

We consider a mixed ownership duopoly delegation model with spatial price discrimination and constant, albeit different, marginal production costs. In contrast to what holds true for a private duopoly, the Nash equilibrium, absent delegation, for a mixed duopoly with discriminatory pricing according to location is both consistent and socially optimal. We find that under Nash conjectures, in most cases, firm owners have a strong incentive to delegate location decisions to managers. In such cases, firms locate closer to each other. The intensity of the competition leads to lower prices, lower profits, for both firms, and increased surplus for the consumer.

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