A Quantity-Setting Mixed Duopoly with Inventory Investment as
a Coordination Device

Kazuhiro Ohnishi

This paper examines a two-period mixed market model in which a welfare maximizing public firm and a profit-maximizing private firm can use inventory investment as a strategic device. It is then demonstrated that the equilibrium in the second period coincides with the Stackelberg solution where the private firm is the leader, and at equilibrium, both social welfare and the private firm's profit are higher than in the game without inventory.

Key Words: Mixed duopoly; Public firm; Private firm; Inventory investment.
JEL Classification Numbers: C72, D21, H42, L13, L32.