Author: Rajnish KumarPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Capacity Constraint, Price Discrimination, and Oligopoly
Spatial Competition and Price Discrimination with Capacity Constraints
Author: Matthias HunoldPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
We characterize mixed-strategy equilibria when capacity constrained suppliers can charge location-based prices to different customers. We establish an equilibrium with prices that weakly increase in the costs of supplying a customer. Despite prices above costs and excess capacities, each supplier exclusively serves its home market in equilibrium. Competition yields volatile market shares and an inefficient allocation of customers to firms. Even ex-post cross-supplies may restore efficiency only partly. We show that consumers may benefit from price discrimination whereas the the firms make the same profits as with uniform pricing. We use our findings to discuss recent competition policy cases and provide hints for a more refined coordinated-effects analysis.
Competitive Spatial Price Discrimination with Capacity Constraints
Author: Jonathan H. HamiltonPublisher:
ISBN:
Category : Price discrimination
Languages : en
Pages : 21
Book Description
Multiregional Oligopoly with Capacity Constraints
Author: Humoud AlsabahPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
We develop a model of Cournot competition between capacity-constrained firms that sell a single good to multiple regions. We provide a novel characterization for the unique equilibrium allocation of the good across regions and design an algorithm to compute it. We show that a reduction in transportation costs by a firm may negatively impact the profit of all firms and reduce aggregate consumer surplus if such a firm is capacity constrained. Our results imply that policies promoting free trade may have unintended consequences and reduce aggregate welfare in capacity-constrained industries.
Price Discrimination in Quantity Setting Oligopoly
Author: Rajnish KumarPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
We analyze a two-stage quantity setting oligopolistic price discrimination game. In the first stage, firms choose capacities and in the second stage they simultaneously choose the share that they assign to each segment. At the equilibrium, the firms focus more on the high-valuation customers. When the capacities in the first stage are endogenous, the deadweight loss does not vanish with the level of price discrimination, as it does in one-stage games and monopoly. Moreover, the quantity-weighted average price increases with the level of price discrimination as opposed to the established results in the literature for one-stage games.
A General Model of Price Competition with Soft Capacity Constraints
Author: Marie-Laure Cabon-DhersinPublisher:
ISBN:
Category :
Languages : en
Pages : 38
Book Description
We propose a general model of oligopoly with firms relying on a two factor production function. In a first stage, firms choose a certain fixed factor level. In the second stage, firms compete on price, and adjust the variable factor to satisfy all the demand.When the factors are substitutable, the capacity constraint is “soft”, implying a convex cost function in the second stage.We show that there exists a continuum of subgame perfect equilibria in pure strategies, whatever the returns to scale. Among them a payoff-dominant one can always be selected.The equilibrium price may increase with the number of firms.
Intertemporal Price Discrimination in Sequential Quantity-Price Games
Author: James D. Dana JrPublisher:
ISBN:
Category : Game theory
Languages : en
Pages : 46
Book Description
This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show that when the elasticity of demand falls across periods, strong competitive forces prevent firms from utilizing intertemporal price discrimination. We then enrich the model by allowing firms to use inventory controls, or sales limits assigned to individual prices. We show that competing firms can profitably use inventory controls. Thus, although typically viewed as a tool to manage demand uncertainty, we show that inventory controls can also facilitate price discrimination in oligopoly.
Third-degree Price Discrimination in Oligopoly when Markets are Covered
Author: Markus Dertwinkel-KaltPublisher:
ISBN: 9783863043353
Category :
Languages : en
Pages :
Book Description
We analyze oligopolistic third-degree price discrimination relative to uniform pricing, when markets are always covered. Pricing equilibria are critically determined by supply-side features such as the number of firms and their marginal cost differences. It follows that each firm's Lerner index under uniform pricing is equal to the weighted harmonic mean of the firm's relative margins under discriminatory pricing. Uniform pricing then decreases average prices and raises consumer surplus. We provide an intriguingly simple approach to calculate the consumer surplus gain from uniform pricing only based on market data of the discriminatory equilibrium (prices and quantities).
Third-Degree Price Discrimination in Oligopoly
Author: Kenneth S. CortsPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Price discrimination by imperfectly competitive firms may intensify competition, leading to lower prices for all consumers; the trade-off of consumer groups' welfare that is characteristic of monopolistic discrimination need not arise. This escalation of competition may make firms worse off, and as a result firms may wish to avoid the discriminatory outcome. Under conditions similar to those in which unambiguous price and welfare effects may arise, unilateral commitments not to price discriminate--including the adoption of everyday low pricing or no-haggle policies--may raise firm profits by softening price competition.
Author: Fabian Herweg