A general model of price competition with soft capacity constraints
Marie-Laure Cabon-Dhersin () and
Nicolas Drouhin ()
Additional contact information
Marie-Laure Cabon-Dhersin: CREAM - Centre de Recherche en Economie Appliquée à la Mondialisation - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université
Post-Print from HAL
We propose a general model of oligopoly with firms relying on a two factor production function. In a first stage, firms choose a certain fixed factor level (capacity). In the second stage, firms compete on price, and adjust the variable factor to satisfy all the demand. When the factors are substitutable, the capacity constraint is " soft " , implying a convex cost function in the second stage. We show that there is a unique equilibrium prediction in pure strategies, whatever the returns to scale, characterized by a price that increases with the number of firms up to a threshold. The main propositions are established under the general assumption that the production function is quasi-concave but the paper provides a general methodology allowing the model to be solved numerically for special parametrical forms.
Keywords: price competition; tacit collusion; capacity con- straint; limit pricing strategy; returns to scale; convex cost; capacity con-straint (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01622930v3
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Published in Economic Theory, Springer Verlag, In press, ⟨10.1007/s00199-019-01203-w⟩
Downloads: (external link)
Journal Article: A general model of price competition with soft capacity constraints (2020)
Working Paper: A general model of price competition with soft capacity constraints (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01622930
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().