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Low price signals high capacity

Listed author(s):
  • Klaus Kultti

    ()

  • Eeva Mauring

    ()

We study pricing in a model where buyers are homogeneous and sellers have either capacity one or two. We show that if buyers observe prices but not capacities then an equilibrium exists where sellers of capacity two post lower prices than sellers of capacity one. The equilibrium satisfies the intuitive criterion. Copyright Springer-Verlag Wien 2014

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File URL: http://hdl.handle.net/10.1007/s00712-013-0355-3
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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 112 (2014)
Issue (Month): 2 (June)
Pages: 165-181

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Handle: RePEc:kap:jeczfn:v:112:y:2014:i:2:p:165-181
DOI: 10.1007/s00712-013-0355-3
Contact details of provider: Web page: http://www.springer.com

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  1. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  2. Godenhielm Mats & Kultti Klaus, 2015. "Directed Search with Endogenous Capacity," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 211-249, July.
  3. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
  4. Guido Menzio, 2007. "A Theory of Partially Directed Search," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 748-769, October.
  5. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
  6. Shouyong Shi, 2002. "Product Market and the Size-Wage Differential," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 21-54, February.
  7. Roberts, Mark J. & Supina, Dylan, 1996. "Output price, markups, and producer size," European Economic Review, Elsevier, vol. 40(3-5), pages 909-921, April.
  8. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
  9. Kultti Klaus, 2011. "Sellers Like Clusters," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-28, December.
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