Monopoly Price Dispersion under Demand Uncertainty

James Dana

International Economic Review, 2001, vol. 42, issue 3, 649-70

Abstract: When a monopolist sets its price before its demand is known, then it may set more than one price and limit the availability of its output at lower prices. This article adds demand uncertainty and price rigidities to the standard model of monopoly pricing. When there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist's optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:42:y:2001:i:3:p:649-70

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