Quantity Competition in the Presence of Strategic Consumers

Andrei Bazhanov, Yuri Levin and Mikhail Nediak

MPRA Paper from University Library of Munich, Germany

Abstract: Oligopolistic retailers decide on the initial inventories of an undifferentiated limited-lifetime product offered to strategic consumers. A manufacturer sets the first-period (full) price, while the second-period (clearance) price is determined by a market clearing process. The resulting symmetric pure-strategy equilibria may lead to no sales in the first or second period (Cournot outcome versus collusion), and sales in both periods with the clearance price above or at the salvage value. The equilibria possess a comprehensive set of monotonic properties. In particular, increasing strategic behavior can benefit retailers and hurt consumers, increasing competition may harm the local economy, and high levels of strategic behavior may insure against oversupply that leads to clearance sales at the salvage value. The welfare-optimal number of retailers can lead to the above-cost clearance price.

Keywords: quantity competition; two-period game; strategic consumers; symmetric equilibria (search for similar items in EconPapers)
JEL-codes: C72 D91 L13 (search for similar items in EconPapers)
Date: 2015-01-28
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://mpra.ub.uni-muenchen.de/72923/8/MPRA_paper_72923.pdf revised version (application/pdf)

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