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Capacity constrained price competition with transportation costs

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  • Muthers, Johannes
  • Hunold, Matthias

Abstract

We characterize mixed-strategy equilibria in case of capacity constrained price competition, transportation costs and customer-specific pricing. Equilibrium prices weakly increase in the distance between supplier and customer. Despite prices above costs and excess capacities, the firms exclusively their serve home markets. Competition yields volatile market shares and an inefficient allocation of more distant customers to suppliers. Even ex-post subcontracts may restore efficiency only partly.

Suggested Citation

  • Muthers, Johannes & Hunold, Matthias, 2017. "Capacity constrained price competition with transportation costs," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168248, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168248
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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