EconPapers    
Economics at your fingertips  
 

Endogenous Investment and Pricing under Uncertainty

David Young

The B.E. Journal of Theoretical Economics, 2010, vol. 10, issue 1, 29

Abstract: I analyze investment and pricing incentives in a differentiated products framework with uncertain demand. Firms choose production capacities before observing demand and choose prices after demand is realized. Unlike previous models, when firms are identical, symmetric pure-strategy equilibria exist, even in the presence of very low capacity costs. The equilibrium outcomes are significantly different from the equivalent Cournot model. Firms choose to underutilize their capacity at times of low demand, and hold more capacity than predicted by Cournot. I show with a simple policy example that even the sign of the comparative statics may differ between the two models.

Keywords: capacity precommitment; Cournot; differentiated products (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://doi.org/10.2202/1935-1704.1537 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejtec:v:10:y:2010:i:1:n:1

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejte/html

DOI: 10.2202/1935-1704.1537

Access Statistics for this article

The B.E. Journal of Theoretical Economics is currently edited by Burkhard C. Schipper

More articles in The B.E. Journal of Theoretical Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().

 
Page updated 2024-12-28
Handle: RePEc:bpj:bejtec:v:10:y:2010:i:1:n:1