A MODEL OF ENDOGENOUS PAYOFF MOTIVES AND ENDOGENOUS TIMING IN A MIXED DUOPOLY *

A model of endogenous payoff motives and endogenous order of moves is analysed in a mixed duopoly. We find that, when a non-negative price constraint is imposed on public and private firms' quantity choice, both firms always choose to be relative-payoff-maximisers, and both simultaneous move and sequential move can be sustained in equilibrium. In contrast, when non-negative absolute profit constraint is imposed, public and private firms always choose to be absolute-payoff-maximisers, and only sequential move can be sustained in equilibrium. Copyright 2009 The Authors. Journal compilation 2009 Blackwell Publishing Ltd/University of Adelaide and Flinders University.