Capacity costs impact pricing in duopoly markets, Cournot outcomes prevail.
The study tested how different ways of sharing customers between two companies affect their pricing and production decisions. The researchers conducted experiments where firms set their production levels and then competed on prices. They found that the way customers are divided between the firms doesn't change how much they produce, but it does affect the prices they charge. When production costs are high, the companies tend to produce similar amounts and compete less, but when costs are low, they produce more and compete more.