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Production in advance versus production to order: Equilibrium and social surplus

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  • Tasnádi, Attila

Abstract

We determine a symmetric mixed-strategy equilibrium of the production-in-advance type symmetric capacity-constrained Bertrand-Edgeworth duopoly game for the most challenging case of intermediate capacities, which was unknown so far. Based on the obtained equilibrium we show that economic surplus within the production-to-order type environment is higher than in the respective production-in-advance type one, and therefore production-to-order should be preferred to production-in-advance if the mode of production can be influenced by the government.

Suggested Citation

  • Tasnádi, Attila, 2019. "Production in advance versus production to order: Equilibrium and social surplus," Corvinus Economics Working Papers (CEWP) 2019/06, Corvinus University of Budapest.
    • Handle: RePEc:cvh:coecwp:2019/06
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    File URL: https://unipub.lib.uni-corvinus.hu/4111/
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    2. Bos, Iwan & Marini, Marco A. & Saulle, Riccardo D., 2024. "Myopic oligopoly pricing," Games and Economic Behavior, Elsevier, vol. 145(C), pages 377-412.
    3. Heywood, John S. & Li, Dongyang & Ye, Guangliang, 2023. "Private provision of price excludable public goods by rivals," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 291-307.
    4. Iwan Bos & Dries Vermeulen & Niloufar Yousefimanesh, 2025. "Equilibrium existence in price-quantity games: a sunk cost paradox," International Journal of Game Theory, Springer;Game Theory Society, vol. 54(2), pages 1-30, December.

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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