Price competition in a capacity-constrained duopoly
1986; Elsevier BV; Volume: 38; Issue: 2 Linguagem: Inglês
10.1016/0022-0531(86)90117-1
ISSN1095-7235
AutoresMartin J. Osborne, Carolyn Pitchik,
Tópico(s)Consumer Market Behavior and Pricing
ResumoThis paper characterizes the set of Nash equilibria in a model of price-setting duopoly in which each firm has limited capacity, and demand is continuous and decreasing. In general there is a unique equilibrium, so that comparative static exercises are meaningful. The properties of the equilibrium conform with a number of stylized facts. The equilibrium prices are lower, the smaller is demand relative to capacity. When demand is in an intermediate range, the firms use mixed strategies—they randomly hold "sales." If capacities are chosen simultaneously, before prices, the set of equilibrium capacities coincides with the set of Cournot quantities.
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