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Peak-load pricing in duopoly

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  • Kim, Jeong-Yoo
  • Lee, Myeong Ho
  • Berg, Nathan

Abstract

In this paper, we consider peak-load pricing by duopolists that maximize profit (not social welfare). We compare price levels and profits across peak-load versus uniform pricing regimes. Our main result is that the introduction of peak-load pricing can plausibly reduce prices by making price competition more severe and thereby reducing profits. This result suggests that competing firms may engage in collusion by not committing to peak-load pricing. Therefore, from the regulator's perspective, it will be desirable to encourage firms to engage in peak-load pricing to intensify competition.

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  • Kim, Jeong-Yoo & Lee, Myeong Ho & Berg, Nathan, 2016. "Peak-load pricing in duopoly," Economic Modelling, Elsevier, vol. 57(C), pages 47-54.
    • Handle: RePEc:eee:ecmode:v:57:y:2016:i:c:p:47-54
    DOI: 10.1016/j.econmod.2016.04.012
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    More about this item

    Keywords

    Peak-load pricing; Congestion; Bertrand–Edgeworth model; Capacity constraint;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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