Endogenous timing in a mixed duopoly when a public firm supplies its private competitor

Abstract

ABSTRACT We examine endogenous timing in a quantity setting mixed duopoly where a public firm, in addition to selling a good in the retail market, manufactures an input required to produce this good and supplies it to its private retail competitor. In this setting, the traditional separation between suppliers and retailers fails to hold, a situation commonly observed in many markets. We focus on the case of regulated input prices, which often appear under such circumstances, and consider both an exogenous input price and one optimally chosen by a regulator. The results may be substantially different from those obtained under conventional assumptions about the relationship between suppliers and retailers. In particular, for a wide range of parameter values early simultaneous moves are observed in equilibrium.