Capacity Choice in a Price-Setting Mixed Oligopoly under Demand Uncertainty

Year 2014, , 40 - 48, 13.08.2015

M. Haluk Cıtcı Mesut Karakas Mesut Karakas

https://doi.org/10.18825/irem.31616

Abstract

We study a mixed oligopoly market in which firms choose the capacities and prices sequentially in an uncertain environment with differentiated products. If the products of the firms are substitutable and realized demand is higher (lower) than expected demand, we find that both firms hold under (excess) capacity. In the case of medium realized demand, private firm choses under capacity but public firm holds excess capacity. If the products are complements and realized demand is high (low) enough, both firms hold under (excess) capacity. Whenever realized demand is conformable with expectations, private and public firms hold under capacity.

Keywords

Mixed oligopoly, capacity choice problem, uncertain demand, differentiated products

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