Inventory Holding and a Mixed Duopoly with a Foreign Joint-Stock Firm

This paper investigates a mixed duopoly model in which there is a state-owned firm competing with a foreign joint-stock firm. The following situation is considered. In the first period, each firm non-cooperatively decides how many it sells in the current market. In addition, each firm can hold inventories for the second-period market. By holding large inventories, a firm may be able to commit to large sales in the next period. In the second period, each firm non-cooperatively chooses its second-period output. At the end of the second period, each firm sells its first-period inventory stocked and its second-period output. The paper discusses the firms’ reaction functions in the mixed duopoly model.