Welfare and Profit Comparison between Quantity and Price Competition in Stackelberg Mixed Duopolies

We compare welfare and profits under price and quantity competition in mixed duopolies, in which a state-owned public firm competes against a private firm. It has been shown that price competition yields larger profit for the private firm and greater welfare if the two firms move simultaneously, regardless of whether the private firm is domestic or foreign. We investigate Stackelberg competition. Under public leadership, the profit and welfare rankings have common features with the simultaneousmove game, regardless of the nationality of private firms. By contrast, under private leadership, the result depends on the nationality of the private firm. When the private firm is domestic, welfare is greater under quantity competition, while the result is reversed when the private firm is foreign. However, regardless of the nationality of the private firm, the private firm earns more under price competition. These results indicate that profit ranking is fairly robust to time structure in mixed Stackelberg duopolies, but welfare ranking is not. JEL classification numbers: H42, H44, L13, L32