Capacity choice in an international mixed triopoly

Ohnishi, Kazuhiro (2019): Capacity choice in an international mixed triopoly.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Excess capacity; State-owned firm; Domestic labor-managed firm; Foreign capitalist firm
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L30 - General

References

Aguerrevere, F. L., 2009. Real options, product market competition, and asset returns. Journal of Finance 64, 957-983.

Artz, B., Heywood, J. S., McGinty, M., 2009. The merger paradox in a mixed oligopoly. Research in Economics 63, 1-10.

Askildsen, J. E., Ireland, N. J., 1993. Human capital, property right, and labour managed firms. Oxford Economic Papers 45, 229-242.

Bagwell, K., Ramey, G., 1996. Capacity, entry, and forward induction. Rand Journal of Economics 27, 660-680.

Bárcena-Ruiz, J. C., 2007. Endogenous timing in a mixed duopoly: Price competition. Journal of Economics 91, 263-272.

Bárcena-Ruiz, J. C., Garzón, M. B., 2003. Mixed duopoly, merger and multiproduct firms. Journal of Economics 80, 27-42.

Barcena-Ruiz, J. C., Garzón, M. B., 2007. Capacity choice in a mixed duopoly under price competition. Economics Bulletin 12, 1-7.

Basu, K., Singh, N., 1985 Commitment and entry-deterrence in a model of duopoly. Economics Letters 18, 265-269.

Basu, K., Singh, N., 1990. Entry-deterrence in Stackelberg perfect equilibria. International Economic Review 31, 61-71.

Beladi, H., Chao, C.-C., 2006. Does privatization improve the environment? Economics Letters 93, 343-347.

Bulow, J., Geanakoplos, J., Klemperer, P., 1985a. Holding idle capacity to deter entry. Economic Journal 95, 178-182.

Bulow, J., Geanakoplos, J., Klemperer, P., 1985b. Multimarket oligopoly: strategic substitutes and complements. Journal of Political Economy 93, 488-511.

Chao, C.-C., Yu, E. S. H., 2006. Partial privatization, foreign competition, and optimal tariff. Review of International Economics 14, 87-92.

Cremer, H., Crémer, J., 1992. Duopoly with employee-controlled and profit-maximizing firms: Bertrand vs Cournot competition. Journal of Comparative Economics 16, 241-258.

Cremer, H., Marchand, M., Thisse, J.-F., 1989. The public firm as an instrument for regulating an oligopolistic market. Oxford Economic Papers 41, 283-301.

Cremer, H., Marchand, M., Thisse, J.-F., 1991. Mixed oligopoly with differentiated products. International Journal of Industrial Organization 9, 43-53.

Cuccia, T., Cellini, R., 2009. Workers' enterprises and the taste for production: the arts, sport and other cases. Scottish Journal of Political Economy 56, 123-137.

Delbono, F., Lambertini, L., 2018. The socially efficient firms’ mix in a duopoly with environmental externalities. In Kazuhiro Ohnishi ed., Firms' Strategic Decisions: Theoretical and Empirical Findings, Volume 3 (pp. 59-68). Bentham Science Publishers, Sharjah, UAE.

Delbono, F., Rossini, G., 1992. Competition policy vs horizontal merger with public entrepreneurial, and labor-managed firms. Journal of Comparative Economics 16, 226-240.

Delbono, F., Scarpa, C., 1995. Upward-sloping reaction functions under quantity competition in mixed oligopolies. Bulletin of Economic Research 47, 341-346.

Dixit, A. K., 1979. A model of duopoly suggesting a theory of entry barrier. Bell Journal of Economics 17, 377-388.

Dixit, A. K., 1980. The role of investment in entry-deterrence. Economic Journal 90, 95-106.

Eaton, B., Lipsey, R., 1981. Capital, commitment and entry equilibrium. Bell Journal of Economics 12, 593-604.

Fjell, K., Heywood, J. S., 2002. Public Stackelberg leadership in a mixed oligopoly with foreign firms. Australian Economic Papers 41, 267-281.

Fjell, K., Pal, D., 1996. A mixed oligopoly in the presence of foreign private firms. Canadian Journal of Economics 29, 737-743.

George, K., La Manna, M., 1996. Mixed duopoly, inefficiency, and public ownership. Review of Industrial Organization 11, 853-860.

Grenadier, S. R., 2002. Option exercise games: an application to the equilibrium investment strategies of firms. Review of Financial Studies 15, 691–721.

Harris, R. G., Wiens, E, G., 1980. Government enterprise: an instrument for internal regulation of industry. Canadian Journal of Economics 13, 125-132.

Heywood, J. S., Ye, G., 2010. Optimal privatization in a mixed duopoly with consistent conjectures. Journal of Economics 101, 231-246.

Horowitz, I., 1991. On the effects of Cournot rivalry between entrepreneurial and cooperative firms. Journal of Comparative Economics 15, 115-121.

Hsu, C. C., Lee, J. Y., Wang, L. F. S., 2018. Undesirable free entry in oligopoly with foreign competitors. In Kazuhiro Ohnishi ed., Firms' Strategic Decisions: Theoretical and Empirical Findings, Volume 3 (pp. 127-143). Bentham Science Publishers, Sharjah, UAE.

Ireland, N. J., 2003. Random pricing by labor-managed firms in markets with imperfect consumer information. Journal of Comparative Economics 31, 573-583.

Ireland, N. J., Stewart, G., 1995. On the sale of production rights and firm organization. Journal of Comparative Economics 21, 289-307.

Kim, H., 1996. Strategic excess capacity and first-mover advantage under variable demand. Seoul Journal of Economics 9, 105-122.

Laffont, J.-J., Moreaux, M., 1985. Large-market Cournot equilibria in labour-managed economies. Economia 52 153-165.

Lambertini, L., 1997. Cournot vs Stackelberg equilibria with entrepreneurial and labour managed firms. Journal of International and Cooperative Economics 5, 31-43.

Lambertini, L., 2001. Spatial competition with profit-maximising and labour-managed firms. Papers in Regional Science 80, 499-507.

Lambertini, L., Rossini, G., 1998. Capital commitment and Cournot competition with labour-managed and profit-maximising firms. Australian Economic Papers 37, 14-21.

Law, P. J., Stewart, G., 1983. Stackelberg duopoly with an Illyrian and profit-maximising firm. Recherches Economiques de Louvain 49, 207-212.

Lu, Y., 2007. Endogenous timing in a mixed oligopoly consisting of a single public firm and foreign competitors. Economics Bulletin 12, 1-7.

Lu, Y., Poddar, S., 2005. Mixed oligopoly and the choice of capacity. Research in Economics 59, 365-374.

Lu, Y., Poddar, S., 2009. Endogenous timing in a mixed duopoly and private duopoly – 'capacity-then-quantity' game: the linear demand case. Australian Economic Papers 48, 138-150.

Luo, J., 2013. Absorptive capacity and R&D strategy in mixed duopoly with labor-managed and profit-maximizing firms. Economic Modelling 31, 433-439.

Matsumura, T., Kanda, O., 2005. Mixed oligopoly at free entry markets. Journal of Economics 84, 27-48.

Merrill, W., Schneider, N., 1966. Government firms in oligopoly industries: a short-run analysis. Quarterly Journal of Economics 80, 400-412.

Mujumdar, S., Pal, D., 1998. Effects of indirect taxation in a mixed oligopoly. Economics Letters 58, 199-204.

Neary, H. M., Ulph, D., 1997. Strategic investment and the co-existence of labour-managed and profit-maximising firms. Canadian Journal of Economics 30, 308-328.

Neilson, W. S., Winter, H., 1992. Unilateral most-favored-customer pricing: a comparison with Stackelberg. Economics Letters 38, 229-232.

Nett, L., 1993. Mixed oligopoly with homogeneous goods. Annals of Public and Cooperative Economics 64, 367-393.

Nett, L., 1994. Why private firms are more innovative than public firms. European Journal of Political Economy 10, 639-653.

Novy-Marx, R., 2007. An equilibrium model of investment under uncertainty. Review of Financial Studies 20, 1461-1502.

Ohnishi, K., 2000. A two-stage price-setting equilibrium designed in consideration of goods relevance and strategic relevance. Australian Economic Papers 39, 173-183.

Ohnishi, K., 2006. A mixed duopoly with a lifetime employment contract as a strategic commitment. FinanzArchiv 62, 108-123.

Ohnishi, K., 2008. Strategic commitment and Cournot competition with labor-managed and profit-maximizing firms. Research in Economics 62, 188-196.

Ohnishi, K., 2009. Capacity investment and mixed duopoly with state-owned and labor-managed firms. Annals of Economics and Finance 10, 49-64.

Ohnishi, K., 2018. A three-stage mixed triopoly with capacity choice. In Kazuhiro Ohnishi ed., Firms' Strategic Decisions: Theoretical and Empirical Findings, Volume 3 (pp. 82-100). Bentham Science Publishers, Sharjah, UAE.

Okamura, M., Futagami, K., 1997. International competition between a profit-maximizing and labor-managed firm. Journal of International and Comparative Economics 5, 217-228.

Okuguchi, K., 1993. Cournot oligopoly with profit-maximizing and labor-managed firms. Keio Economic Studies 30, 27-38.

Pal, D., 1998. Endogenous timing in a mixed oligopoly. Economics Letters 61, 181-185.

Pal, D., Saha, B., 2014. Mixed duopoly and environment. Journal of Public Economic Theory 16, 96-118.

Pal, D., White, M. D., 1998. Mixed oligopoly, privatization, and strategic trade policy. Southern Economic Journal 65, 264-281.

Poddar, S., 2003. Excess capacity: a note. Keio Economic Studies 40, 75-83.

Poyago-Theotoky, J., 1998. R&D competition in a mixed duopoly under uncertainty and easy imitation. Journal of Comparative Economics 26, 415-428.

Poyago-Theotoky, J., 2001. Mixed oligopoly, subsidization and the order of firms’ moves: an irrelevance result. Economics Bulletin 12, 1-5.

Roy chowdhury, P., 2009. Mixed oligopoly with distortions: First best with budget-balance and the irrelevance principle. Economics Bulletin 29, 1885-1900.

Saha B., Sensarma, R., 2008. The distributive role of managerial incentives in a mixed duopoly. Economics Bulletin 12, 1-10.

Spence, A. M., 1977. Entry, capacity, investment and oligopolistic pricing. Bell Journal of Economics 8, 534-544.

Stephan, F. H. (Ed.), 1982. The Performance of Labour-managed Firms. Macmillan Press, London.

Stewart, G., 1991. Strategic entry interactions involving profit-maximising and labour-managed firms. Oxford Economic Papers 43, 570-583.

Stewart, G.., 1992. Management objectives and strategic interactions among capitalist and labour-managed firms. Journal of Economic Behavior and Organization 17, 423-431.

Wang, L. F. S., Wang, J., 2009. Environmental taxes in a differentiated mixed duopoly. Economic Systems 33, 389-396.

Ward, N., 1958. The firm in Illyria: market syndicalism. American Economic Review 48, 566-589.

Ware, R., 1984. Sunk costs and strategic commitment: a proposed three-stage equilibrium. Economic Journal 94, 370-378.

Ware, R., 1986. A model of public enterprise with entry. Canadian Journal Economics 19, 642-655.

Wenders, J. T., 1971. Excess capacity as a barrier to entry. Journal of Industrial Economics 20, 14-19.

White, M. D., 1996. Mixed oligopoly, privatization and subsidization. Economics Letters 53, 189-195.

Willner, J., 1994. Welfare maximization with endogenous average costs. International Journal of Industrial Organization 12, 373-386.

Zhang, J., Li, C., 2013. Endogenous R&D spillover and location choice in a mixed oligopoly. Annals of Regional Science 51, 459-477.