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Shortages, Segmentation, and Self-Selection


  • D. G. Ferguson


This paper considers the rationality and implications of using shortages as a self-selection device. Shortages lead to uncertain access and enable sellers to offer ensured access, either to the good or to a preferred variety of the good, at a higher price or as part of a bundle. It is shown that such activities allow firms to span nonconcavities in their revenue function. Firms respond to changes in demand and costs through changes in quantity and/or the premium for ensured access but not through changes in the base price.

Suggested Citation

  • D. G. Ferguson, 1994. "Shortages, Segmentation, and Self-Selection," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 183-197, February.
  • Handle: RePEc:cje:issued:v:27:y:1994:i:1:p:183-97

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