On capacity precommitment . . .

This paper considers a capacity pre-commitment game where cost are un-known. We expand the model of Kreps and Scheinkman to the uncertainty case. Firms choose capacities under uncertainty about marginal costs in the price setting stage. The setup is plausible as in reality, firms do not know marginal costs exactly at the capacity stage. We can show that equilibria are necessarily asymmetric. While the weakly larger firm always behaves like a Cournot player, the opponent has an incentive to lower ca-pacities. In an extension we show that if units costs differ, results change substantially