Effects of Uniform Capacity Constraints on Quantity–Quality Competition

ABSTRACT This article highlights quality and quantity competition with capacity constraints under different theoretical scenarios. We capture the effects on equilibrium by first‐mover strategies and capacity constraints under Cournot and Stackelberg competitions, respectively. Our major findings are as follows. First, under a Stackelberg case, market share differences decrease with increased total resources. Second, the first‐mover firm always produces higher quality products and earns more profits under duopoly conditions. Third, consumer surplus under the Cournot case is less than those under the Stackelberg case. Fourth, social welfare increases with increased total resources in both cases, though it is more significant under a Cournot competition than under a Stackelberg competition.