Capacity Choice in a Mixed Duopoly with Managerial Delegation

This paper studies capacity choice in a mixed duopoly with differentiated goods under quantity competition and price competition, taking into account the separation between ownership and management. In this paper, we show that in equilibrium, under quantity competition, both the public firm and the private firm choose over capacity, while under price competition, both choose under capacity. Moreover, in both the competition types, we found that the results do not depend on the degree of product differentiation. Furthermore, under both the competition types, we conduct detailed analysis of each firm`s delegation parameter of managerial contract, and we compare the equilibrium market outcomes obtained in our model with those in the entrepreneurial case, which is considered in several existing literature, and those in the private duopolistic case, which corresponds to the one after privatization of the public firm.