Stackelberg Mixed Duopoly with a Foreign Competitor

Abstract

We investigate Stackelberg mixed duopoly models where a stateowned public firm and a foreign private firm compete. We examine a desirable role (either leader or follower) of the public firm. We also consider endogenous roles by adopting the observable delay game of Hamilton and Slutsky (1990). We find that, in contrast to Pal (1998) discussing a case of domestic competitors, the public firm should be the leader and that it becomes the leader in the endogenous role game. We also find that in contrast to Ono (1990) eliminating a foreign firm does not improve domestic welfare in mixed oligopolies.

Stackelberg Equilibrium in a Mixed Duopoly

“…These results complement those obtained by Matsumura [4] who demonstrate that if the demand function is concave the domestic public firm is strong and private firm is always weak.…”

“…They showed that in simultaneous-move games, privatization of the public firm may improve welfare. In the paper by Matsumura [4], the author investigates mixed duopoly and analyzes a desirable role (either leader or follower) of the public firm, when the inverse demand function ( ( ( ( ) ) ) ) G p p = = = = is concave. Under these conditions, Matsumura founds that the role of he public firm should be that of the leader.…”

“…In contrast to [4], here we consider an inverse demand function convex. In this case the role of the domestic public firm could be the leader or the follower, this role depends on the reaction function of private foreign firm.…”

Endogenous Timing in a Mixed Oligopoly with Foreign Competitors: the Linear Demand Case

“…We find that the public firm chooses to be a follower of all domestic private firms and that the public firm chooses not to be a leader of all foreign private firms, which is in contrast to Matsumura (2003). …”

Endougenous Timing in a Mixed Duopoly

“…Pal (1998) analyses a domestic oligopoly with linear cost and demand functions; Matsumura (2003) focused on international mixed duopoly with convex costs and concave demand; Cornes and Sepahvand (2003) and Sepahvand (2004) consider international mixed duopolies with strictly log-concave demand and strictly convex cost functions. The aim of the present work is to generalize their analysis for the general case of a mixed duopoly (both domestic and international) limiting the assumptions to the mildest conditions needed to ensure existence of equilibria.…”