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Low price signals high capacity

Klaus Kultti () and Eeva Mauring

Journal of Economics, 2014, vol. 112, issue 2, 165-181

Abstract: We study pricing in a model where buyers are homogeneous and sellers have either capacity one or two. We show that if buyers observe prices but not capacities then an equilibrium exists where sellers of capacity two post lower prices than sellers of capacity one. The equilibrium satisfies the intuitive criterion. Copyright Springer-Verlag Wien 2014

Keywords: Prices; Capacity; Signalling; D24; D82 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s00712-013-0355-3

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