Demand-Enhancing Investment in Mixed Duopoly
Type
working paper
Date Issued
2010
Author(s)
Abstract
This paper examines demand-enhancing investment and pricing in mixed duopoly. We analyze a model with differentiated products and reduced-form demand, making no assumptions on the relative efficiency of the public firm. First, we derive sufficient conditions for public investment to crowd out private investment. Second, we characterize the conditions under which individual investments (prices, respectively) in the mixed duopoly are higher (lower) than in the standard duopoly. Third, we show that with linear demand the public firm effectively disciplines the private firm, inducing an improvement in its price-quality ratio relative to the standard duopoly.
Language
English
Keywords
Mixed oligopoly
price
investment
quality
HSG Classification
contribution to scientific community
Refereed
No
Publisher
University of St. Gallen, Department of Economics Discussion Paper 2010- 16
Subject(s)
Eprints ID
71137
File(s)![Thumbnail Image]()
open.access
Name
DP-1016-Bu.pdf
Size
354.04 KB
Format
Adobe PDF
Checksum (MD5)
4c2f65b04c34365907080884982d9ada