Competition over price and service rate when demand is stochastic: a strategic analysis

Article Abstract:

Economic theory indicates that prices should vary in response to changes in demand. In real life, however, this may not be so and rationing or stockouts may be the rule. A model of stochastic demand that describes price and service rate competition is developed. The proposed two-stage model involves the simultaneous selection of prices and service capacities by firms, followed by the entry of consumers with perfect information, but no knowledge of aggregate demand. The results indicate that excess inventory, rationing and a price above marginal cost may characterize equilibrium.

Models, Competition (Economics), Pricing, Rationing

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Consumer choice and Cournot behavior in capacity-constrained duopoly competition

Article Abstract:

A two-stage model of duopolistic capacity choice and subsequent price competition is presented to show that significant consumer switching costs can deter consumers from seeking service at a low-price firm. An equilibrium classification for capacity-constrained duopoly competition is established and applied to residual demand functions based on the practice of first-come first-served rationing and the assumption of high switching costs. The equilibrium robustness of Cournot behavior in duopoly markets where entry is protected is supported.

Consumer behavior, Duopolies

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One smart agent

Article Abstract:

An equilibrium concept was formulated to represent a group of games, which are often used in Industrial Organization's literary works, wherein players make permanent significant decisions. The concept is inferior when compared to Nash equilibrium and entails the use of a mixed survivor principle with an entry-related premise. This premise is based on a requirement that a market gap can be readily filled by an agent.

Economics, Research and Development in the Social Sciences and Humanities, Economic research

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