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Asymmetric capacity constraints and equilibrium price dispersion

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  • Arnold, Michael A.
  • Saliba, Christine

Abstract

Price dispersion arises despite perfect information about prices. In equilibrium the higher capacity firm adopts a high-price, high-availability strategy, the lower capacity firm adopts a low-price, low-availability strategy, and consumers are more likely to shop at the high-price firm.

Suggested Citation

  • Arnold, Michael A. & Saliba, Christine, 2011. "Asymmetric capacity constraints and equilibrium price dispersion," Economics Letters, Elsevier, vol. 111(2), pages 158-160, May.
    • Handle: RePEc:eee:ecolet:v:111:y:2011:i:2:p:158-160
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    References listed on IDEAS

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    1. Carl Davidson & Raymond Deneckere, 1986. "Long-Run Competition in Capacity, Short-Run Competition in Price, and the Cournot Model," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 404-415, Autumn.
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    7. Diego Escobari & Li Gan, 2007. "Price Dispersion under Costly Capacity and Demand Uncertainty," NBER Working Papers 13075, National Bureau of Economic Research, Inc.
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    10. Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters, in: E-commerce, pages 541-558, National Bureau of Economic Research, Inc.
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    12. Dana, James D, Jr, 2001. "Competition in Price and Availability When Availability is Unobservable," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 497-513, Autumn.
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    Cited by:

    1. Debashrita Mohapatra & Debi Prasad Mohapatra & Ram Sewak Dubey, 2023. "Price dispersion across online platforms: Evidence from hotel room prices in London (UK)," Papers 2310.12341, arXiv.org.
    2. Nie, Pu-yan & Chen, You-hua, 2012. "Duopoly competitions with capacity constrained input," Economic Modelling, Elsevier, vol. 29(5), pages 1715-1721.
    3. Pu-yan Nie, 2014. "Effects of capacity constraints on mixed duopoly," Journal of Economics, Springer, vol. 112(3), pages 283-294, July.

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