Shared manufacturing in a differentiated duopoly with capacity constraints

This study proposes a differentiated duopoly model considering capacity constraints and shared manufacturing, investigates the effects of product differentiation and capacity constraints in three scenarios, and compares the equilibrium outcomes in the three cases under Cournot and Stackelberg competitions. We find that capacity constraints affect the relationships between product differentiation and equilibrium results, even the market share of enterprises. Shared manufacturing impacts the degree of excess capacity, profits, consumer surplus, and social welfare. However, shared manufacturing may sometimes play a negative role in alleviating excess capacity. Moreover, the Cournot competition is a better choice for enterprises with capacity constraints than the Stackelberg competition.