Endogenous Timing in Mixed Duopoly with Increasing Marginal Costs

Abstract

This paper investigates the desirable roles of both public and private firms with increasing marginal costs in mixed duopoly. In contrast to Pal [1998] and Mat- sumura [2003a], who use the constant-marginal-cost model, we show that it is possible for each firm to prefer the role of either the leader or the follower. Furthermore, this paper analyzes the endogenization of the production timing of both types of firms by using the observable-delay game of Hamilton and Slutsky [1990]. We find that even with increasing marginal costs, we can obtain Pal's result - the two types of Stackelberg outcomes are in equilibrium.