Yuanzhu Lu

Firm Ownership, Product Differentiation and Welfare

The purpose of this paper is to study the impact of firm ownership in a differentiated industry. We find there is no effect on product differentiation and welfare due to ownership ratio change between private and state so long as the private (state) ownership in a partially state-owned firm remains at least half (less than half). However, when the private (state) ownership in the partially state-owned firm falls below half (rises more than half), the degree of product differentiation increases (decreases) whereas welfare decreases (increases) in the share of private (state) ownership; and thus the extent of private or state ownership matters.

Endogenous Timing in a Mixed Duopoly and Private Duopoly - 'Capacity-then-Quantity' Game: The Linear Demand Case

We consider a game of endogenous timing of sequential choice of capacity and quantity with observable delay in a mixed duopoly and a private duopoly under two possible time structures. In mixed duopoly, we find that a simultaneous play at the capacity stage or at the quantity stage can never be supported as subgame perfect Nash equilibrium (SPNE); whereas a simultaneous play at each stage turns out to be the unique SPNE in a private duopoly. In mixed duopoly there is multiplicity of equilibria and all SPNEs require sequentiality at the capacity as well as quantity stage. These equilibrium outcomes are invariant with respect to the endogenous time structures. In this context, we also show that the public firm never chooses over (excess) capacity in mixed duopoly, while the private firm never chooses under capacity in both mixed and private duopoly.

TACIT COLLUSION WITH QUANTITY‐MATCHING PUNISHMENTS IN A HOMOGENEOUS MARKET*

Tacit collusion with quantity‐matching punishments in a homogeneous market is investigated. The findings are the following: (i) tacit collusion can arise with quantity‐matching punishments in a homogeneous market, (ii) the monopoly quantity cannot be supported by quantity‐matching punishment strategy, and (iii) compared with Nash‐reversion punishments, collusion is no easier to sustain, but not necessarily harder. The results are compared with those in Lu and Wright (International Journal of Industrial Organization, Vol. 28 (2010), pp. 298–306) with price‐matching punishments. A linear demand example is provided to illustrate the theory.

A Note on the Leapfrogging Issue in a Quality Choice Game

This note discusses the leapfrogging issue in a quality choice game, namely a game in which two firms choose qualities sequentially and then compete in prices simultaneously. It first shows that ignoring the issue will lead to wrong results and then presents how to get correct results.