Endogenous timing game in a mixed duopoly with partial foreign ownership and asymmetric increasing marginal costs

Abstract

AbstractThis 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.