This paper characterizes the set of NASH equilibria in a price setting duopoly in which firms have limited capacity, and in which unit costs of production up to capacity may differ. Assuming concave revenue and efficient rationing, we show that the case of different unit costs involves a...

With few exceptions, the literature on the role of capacity as a strategic entry deterrent has assumed Cournot competition in the post-entry game. In contrast, our model is in the spirit of Kreps and Scheinkman (1983): the incumbent and entrant sequentially precommit to capacity levels before...