This chapter examines a market comprising a labour-managed firm, a capitalist
firm and a state-owned firm. The following situation is considered. In stage one, the
capitalist firm and the labour-managed firm are allowed to install capacity. In stage two,
the state-owned firm is allowed to install capacity. None of the firms can reduce or
dispose of capacity. In stage three, the firms simultaneously and independently choose
output. The chapter demonstrates that there is a subgame perfect equilibrium in which
only the labour-managed firm installs excess capacity as a strategic device.
Keywords: Three-stage triopoly game, Capacity choice, Capitalist firm, Labourmanaged
firm, State-owned firm, Subgame perfect equilibrium.