We study a two-period duopoly game with capacity accumulation under demand uncertainty, production and time-to-build constraints. These considerations are relevant in network industries such as electricity markets and hot spot markets.We characterize and compare open-loop, Markov perfect and closed-loop Nash equilibrium investments.
We analyze collusion in two comparable market structures. In the first market structure only one firm is vertically integrated; there is one more independent firm in the upstream industry and another independent firm in the downstream industry. In the second market structure, there are only two vertically integrated firms that can trade among themselves in… (More)