Capacity Choice in an International Mixed Triopoly

ABSTRACT This paper considers a mixed triopoly model where a state-owned firm, a domestic labor-managed firm and a foreign capitalist firm are allowed to pre-install capacity as a strategic commitment device. First, each firm can choose its capacity level simultaneously and independently. None of the firms can reduce or dispose of capacity. Second, each firm chooses its output level simultaneously and independently. The paper presents the equilibrium outcomes of the international triopoly model. We find that the equilibrium outcomes are not profitable for the foreign capitalist firm.