Price versus Quantity in a Mixed Duopoly with Environmental Damage

Abstract

This paper examines the strategic choice of price and quantity in a mixed duopoly with a public firm and a private firm when environmental damage is included. The public firm needs to bear the harm caused by environmental damage. In contrast with Matsumura and Ogawa who find price is the unique equilibrium in a standard mixed duopoly, I show that dependent on the degree of environmental damage, all four types of choices of price and quantity can constitute strategy equilibria.