Advanced Search
MyIDEAS: Login to save this article or follow this journal

Competition Over Price and Service Rate When Demand is Stochastic: A Strategic Analysis

Contents:

Author Info

  • Raymond Deneckere
  • James Peck

Abstract

We consider a two-stage game in which firms simultaneously select prices and capacities. Then, a random number of consumers attends the market and selects a firm to visit. Consumers know all prices and quantities but not the realization of aggregate demand. The probability of being served at any firm depends on its capacity and the mixed strategy chosen by consumers, which equalizes the utility of each firm's price-service pair. We show that there exists at most one equilibrium in which firms choose pure strategies, and characterize the "candidate" equilibrium. Consumers face a probability of being rationed, firms may have excess inventory, and the price remains above marginal cost. When there are sufficiently many firms, the candidate is shown to be an equilibrium.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://links.jstor.org/sici?sici=0741-6261%28199521%2926%3A1%3C148%3ACOPASR%3E2.0.CO%3B2-U&origin=repec
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 26 (1995)
Issue (Month): 1 (Spring)
Pages: 148-162

as in new window
Handle: RePEc:rje:randje:v:26:y:1995:i:spring:p:148-162

Contact details of provider:
Web page: http://www.rje.org

Order Information:
Web: https://editorialexpress.com/cgi-bin/rje_online.cgi

Related research

Keywords:

Other versions of this item:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Michael Peters & Sergei Severinov, 1995. "Competition Among Sellers who offer Auctions Instead of Prices," Working Papers, University of Toronto, Department of Economics peters-95-02, University of Toronto, Department of Economics.
  2. Pekka Ilmakunnas, 2002. "Strategic behavior in a service industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 23(2), pages 69-82.
  3. Pedro Gomis-Porqueras & Benoit Julien & Chengsi Wang, 2010. "Pricing, Advertising, and Market Structure with Frictions," Discussion Papers, School of Economics, The University of New South Wales 2010-20, School of Economics, The University of New South Wales.
  4. Dennis W. Carlton, 1996. "A Critical Assessment of the Role of Imperfect Competition in Macroeconomics," NBER Working Papers 5782, National Bureau of Economic Research, Inc.
  5. Andrew F. Daughety & Jennifer F. Reinganum, 2007. "Mass Torts and the Incentives for Suit, Settlement, and Trial," Vanderbilt University Department of Economics Working Papers, Vanderbilt University Department of Economics 0713, Vanderbilt University Department of Economics.
  6. Marvel, Howard P. & Wang, Hao, 2009. "Distribution contracts to support optimal inventory holdings under demand uncertainty," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(5), pages 625-631, September.
  7. Michael Sattinger, 2002. "A Queuing Model of the Market for Access to Trading Partners," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 533-548, May.
  8. Edner Bataille & Benoit Julien, 2005. "Advertising, Pricing & Market Structure in Competitive Matching Markets," Industrial Organization, EconWPA 0511008, EconWPA.
  9. Mei Xue & Patrick T. Harker, 2003. "Service Co-Production, Customer Efficiency and Market Competition," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 03-03, Wharton School Center for Financial Institutions, University of Pennsylvania.
  10. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier, Elsevier.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:26:y:1995:i:spring:p:148-162. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.