PRICE-COMPETITION IN NONCOOPERATIVE JOINT VENTURES

Firms that participate in a cotenancy joint venture are able to utilize capacity that is left unused by other firms. This paper considers a cotenancy involving two or more firms. In equilibrium, the firms quote prices that are socially optimal given the level of aggregate capacity. When there is open entry, the resulting (common) equilibrium price converges to the Ramsey optimal price. A cotenancy may be of use as an alternative to direct regulation of a natural monopoly or as an antitrust remedy, as it combines the benefits of single plant production with competition at the marketing stage.