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Dynamic Price Competition with Capacity Constraints and Strategic Buyers

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Author Info
Biglaiser, Gary
Vettas, Nikolaos
Abstract

We analyse a set of simple dynamic models where sellers are capacity constrained over the length of the model. Buyers act strategically in the market, knowing that their purchases may affect future prices. The model is examined when there are single and multiple buyers, with both linear and non-linear pricing. We find that, in general, there are only mixed strategy equilibria and that sellers get a rent above the amount needed to satisfy the market demand that the other seller cannot meet. Buyers would like to commit not to buy in the future. Furthermore, sellers’ market shares tend to be maximally asymmetric with high probability, even though they are ex ante identical.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4315.

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Date of creation: Mar 2004
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Handle: RePEc:cpr:ceprdp:4315

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Related research
Keywords: bilateral oligopoly; capacity constraints; linear and non-linear pricing;

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Christou, Charalambos & Kotseva, Rossitsa & Vettas, Nikolaos, 2007. "Pricing, Investments and Mergers with Intertemporal Capacity Constraints," CEPR Discussion Papers 6433, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Dietrich Franz & List Christian, 2009. "Propositionwise judgment aggregation," Research Memoranda 020, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  3. Bergès, Fabian & Chambolle, Claire, 2007. "Threat of Exit as a Source of Bargaining Power," IDEI Working Papers 471, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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