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Monopoly Price Dispersion under Demand Uncertainty


  • Dana, James D, Jr


When a monopolist sets its price before its demand is known, then it may set more than one price and limit the availability of its output at lower prices. This article adds demand uncertainty and price rigidities to the standard model of monopoly pricing. When there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist's optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price.

Suggested Citation

  • Dana, James D, Jr, 2001. "Monopoly Price Dispersion under Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 649-670, August.
  • Handle: RePEc:ier:iecrev:v:42:y:2001:i:3:p:649-70

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    References listed on IDEAS

    1. Jennifer F. Reinganum, 1985. "Innovation and Industry Evolution," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 81-99.
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    5. Christopher Harris & John Vickers, 1985. "Perfect Equilibrium in a Model of a Race," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 193-209.
    6. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    7. Christopher Budd & Christopher Harris & John Vickers, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 543-573.
    8. Kapur, Sandeep, 1995. "Technological Diffusion with Social Learning," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 173-195, June.
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