Friday, October 19, 2018
Carlos, Gutiérrez-Hita (Departamento de Estudios Económicos y Financieros); Vicente-Pérez, José (Departamento Fundamentos Análisis Económico) provide thoughts On Supply Function Equilibria in a Mixed Duopoly.
ABSTRACT: In this paper we present a mixed duopoly model of supply function competition under uncertainty with product differentiation. We find that, regardless the nature of product heterogeneity, the best response of the private firm always arises as strategic complement. Contrary to this, state-owned firm's best response arises either as strategic complement or substitute depending on the product heterogeneity. As a result of the ex post realization of the demand uncertainty, different equilibria are reached.