Oligopoly Pricing with Capacity Constraints

Timothy Bresnahan () and Valérie Y. Suslow

Annals of Economics and Statistics, 1989, issue 15-16, 267-289

Abstract: The shape of short run marginal cost (SRMC) is critical to understanding pricing behavior over the business cycle. We construct an econometric model of output and price determination for an industry with steep SRMC around capacity. In the North American aluminum industry, the capacity constraint plays an important role in pricing. When it binds, prices are high over a broad range of industry concentration. Market power raised prices at the cyclical trough much more when the industry was concentrated than it does now.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1989:i:15-16:p:267-289

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