Preemption in Capacity and Price Determination - A Study of Endogenous Timing of Decisions for Homogeneous Markets

Sandra Güth and Werner Güth ()

No 309, CESifo Working Paper Series from CESifo

Abstract: Endogenous timing can help to derive the time structure of decision making instead of assuming it as exogenously given. In our study we consider a homogeneous market where, like in the model of Kreps and Scheinkman (1983), sellers determine "sales capacities" before prices. Sellers must serve customers, but at higher costs when demand exceeds "capacitiy". Our model allows for preemption in "capacity" as well as in price determination. Since preemption means to decide before the random choice of cost parameters reflecting the stochastic nature of (excess) "capacity" costs, preemptive commitments are no obviously better timing dispositions.

Date: 2000
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Working Paper: Preemption in capacity and price determination: A study of endogenous timing of decisions for homogeneous markets (1998)
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