Capacity Investments in Congestible Duopoly Networks

This paper focuses on the capacity-investments in a duopoly setup where quality is determined by congestion. Network providers invest in capacity-expanding measures first and then compete in prices. A continuum of consumers have to decide which firms they connect (or do not connect at all). A unique profit-maximizing capacity-investment level is found, and a threshold condition to determine whether over-investing or under-investing is brought.