PRICE-COMPETITION IN NONCOOPERATIVE JOINT VENTURES

Firms that participate in a cotenancy joint venture are able to utiliz e capacity that is left unused by other firms. This paper considers a cotenancy involving two or more firms. In equilibrium, the firms quote prices that are socially optimal given the level of aggregate capacit y. When there is open entry, the resulting (common) equilibrium price converges to the Ramsey optimal price. A cotenancy may be of use as an alternative to direct regulation of a natural monopoly or as an antit rust remedy, as it combines the benefits of single plant production wi th competition at the marketing stage.