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Investment timing and capacity choice under common ownership in a duopoly

We study how common ownership affects the timing and size of capacity investments by duopolists in ways that might lead to anticompetitive outcomes. Alongside accommodation and delay strategies, internalization also allows the leader to block follower entry permanently. We find that internalization magnifies the effect of leader capacity on the follower's capacity and timing, but at low internalization levels the leader still prefers to delay the follower at low demand states and accommodate at high demand states. At intermediate internalization levels, the leader may opt for a costly blockade at a low demand state if drift and volatility are high, and at a high demand state the outcomes resemble those of the static Stackelberg model. Finally, we show numerically that a small degree of internalization can be procompetitive by prompting the leader to switch to accommodation later.