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Endogenous timing game in a mixed duopoly with partial foreign ownership and asymmetric increasing marginal costs
Author(s) -
Kawasaki Akio,
Ohkawa Takao,
Okamura Makoto
Publication year - 2020
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 - 10.1111/1467-8454.12170
Subject(s) - marginal cost , microeconomics , duopoly , economics , mixed economy , foreign ownership , business , public ownership , industrial organization , market economy , foreign direct investment , cournot competition , macroeconomics
This study examines a timing game in a mixed duopoly wherein public and private firms compete by taking account of the increasing marginal cost of both firms, as well as partial foreign ownership of the private firm. This study finds that if the private firm has a strong cost advantage over the public firm, public leadership is a risk dominant equilibrium irrespective of foreign ownership ratio. This result means that the cost difference between the public and private firms matters in selecting the risk‐dominant equilibrium of the timing game. Additionally, if the private firm has only a weak cost advantage over the public firm, then private leadership (public leadership) is the risk dominant equilibrium if the foreign ownership ratio is (not) small.