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Endogenous Timing in Mixed Duopolies With Externality
Author(s) -
Matsumura Toshihiro,
Ogawa Akira
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 - 10.1111/1467-8454.12104
Subject(s) - externality , economics , microeconomics , duopoly , outcome (game theory) , welfare , competition (biology) , yield (engineering) , cournot competition , market economy , ecology , materials science , metallurgy , biology
We investigate endogenous timing in a mixed duopoly with a negative externality. We find that quantity (price) competition yields a simultaneous‐move (sequential‐move) outcome under a significant negative externality. These results indicate that mixed duopolies yield the same results as private duopolies under a significant negative externality, which is in sharp contrast to the results in mixed duopolies without a negative externality. Unless the negative externality is insignificant, public leadership yields greater welfare than private leadership, and public leadership is more robust than the private leadership as equilibrium. If optimal environmental tax policy is introduced, however, private leadership yields the greatest welfare and this an equilibrium outcome in the endogenous timing game under quantity competition.