Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Thursday, July 1, 2010

Demand-Enhancing Investment in Mixed Duopoly

Posted by D. Daniel Sokol

Stefan B├╝hler (Institute of Public Finance and Fiscal Law - University of St. Gallen) and Simon Wey (University of Zurich) discuss Demand-Enhancing Investment in Mixed Duopoly.

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.

http://lawprofessors.typepad.com/antitrustprof_blog/2010/07/demandenhancing-investment-in-mixed-duopoly.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0133f03e2e5b970b

Listed below are links to weblogs that reference Demand-Enhancing Investment in Mixed Duopoly:

Comments

Post a comment