STANĚK, Rostislav. Price Competition with Capacity Constraint and Imperfect Information. In Ramík, J., Stavárek, D. Proceedings of 30th International Conference Mathematical Methods in Economics. 1st ed. Karviná: Silesian University, School of Business Administration, 2012. p. 830-835. ISBN 978-80-7248-779-0.
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Basic information
Original name Price Competition with Capacity Constraint and Imperfect Information
Authors STANĚK, Rostislav (203 Czech Republic, guarantor, belonging to the institution).
Edition 1. vyd. Karviná, Proceedings of 30th International Conference Mathematical Methods in Economics, p. 830-835, 6 pp. 2012.
Publisher Silesian University, School of Business Administration
Other information
Original language English
Type of outcome Proceedings paper
Field of Study 50200 5.2 Economics and Business
Country of publisher Czech Republic
Confidentiality degree is not subject to a state or trade secret
Publication form printed version "print"
RIV identification code RIV/00216224:14560/12:00060940
Organization unit Faculty of Economics and Administration
ISBN 978-80-7248-779-0
UT WoS 000316715900142
Keywords in English bertrand competition; imperefect information; capacity constraint; mixed-strategy equilibrium
Tags International impact, Reviewed
Changed by Changed by: doc. Ing. Rostislav Staněk, Ph.D., učo 75243. Changed: 25. 3. 2014 17:48.
Abstract
Kreps-Sheinkman model introduces a capacity choice into the model of price competition. It shows that in the context of a one-shot game, the environment in which oligopolists make capacity decisions and then post prices for their products has the same Nash equilibrium as the environment in which oligopolists make output decisions and sell their output at market clearing prices. The aim of this paper is to investigate the robustness of this claim. I consider the two-stage game where firms make capacity decision rst and then compete in prices subject to their supply limits. Contrary to Kreps and Sheinkman, I assume that firms have imperfect information about their rival's capacity choice. I show that in this case the Cournot equilibrium conclusion does not hold, because the model has no pure strategy equilibrium. Moreover, the mixed strategy equilibrium has a surprising property. Expected market price increases when there are more firms in the market. This conclusion holds for surplus-maximizing as well as proportional rationing rule.
Links
MUNI/A/0796/2011, interní kód MUName: Mikroekonomické základy politiky hospodářské soutěže a jejich praktické aplikace (Acronym: MizaHoPo)
Investor: Masaryk University, Category A
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