Abstract
This chapter examines a market comprising a labour-managed firm, a capitalist firm and a state-owned firm. The following situation is considered. In stage one, the capitalist firm and the labour-managed firm are allowed to install capacity. In stage two, the state-owned firm is allowed to install capacity. None of the firms can reduce or dispose of capacity. In stage three, the firms simultaneously and independently choose output. The chapter demonstrates that there is a subgame perfect equilibrium in which only the labour-managed firm installs excess capacity as a strategic device.
Keywords: Three-stage triopoly game, Capacity choice, Capitalist firm, Labourmanaged firm, State-owned firm, Subgame perfect equilibrium.
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