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Choosing Price or Quantity? The Role of Delegation and Network Externalities in a Mixed Duopoly
Author(s) -
Nakamura Yasuhiko
Publication year - 2017
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12079
Subject(s) - duopoly , microeconomics , product differentiation , delegation , market structure , economics , social welfare , profit (economics) , cournot competition , network effect , competition (biology) , externality , bertrand competition , industrial organization , business , oligopoly , ecology , management , political science , law , biology
Abstract This paper considers a differentiated goods managerial mixed duopoly composed of one social welfare‐maximising public firm and one profit‐maximising private firm. We model the firm choice of the strategic contract. We find that when the strength of network effects is sufficiently strong, the price competition can become the unique equilibrium market structure. Furthermore, we show that there exists an area of the degree of product differentiation and the strength of network effects such that the situation wherein the public firm chooses its price contract whereas the private firm chooses its quantity contract can become the unique equilibrium structure.