In some strategic alliances, a firm shares its manufacturing capacity with another, and the latter shares its distribution capacity with the former. Even though such bidirectional alliances have become common, they remain challenging to manage due to the frequent disputes over capacity...

Market competition may lead to mismatch between supply and demand. That is, overpricing maygive rise to underselling, and underpricing may yield stockout. Capacity sharing is a commonpractice to align excessive capacity with excessive demand. Yet the strategic interaction betweencompetition and...