The Choice of Prices vs. Quantities under Uncertainty

Arbeitspapier

This paper analyzes a duopoly model with stochastic demand in which firms first choose their strategy variable and compete afterwards. Contrary to the existing literature, we show that firms do not always choose a quantity which is the variable that induces a smaller degree of competition. The reason is that demand uncertainty and the degree of substitutability have countervailing effects on variable choice. Higher uncertainty favors prices, while closer substitutability favors quantities. Moreover, for intermediate values firms choose different strategy variables in equilibrium.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Munich Discussion Paper ; No. 2007-14

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets
• Subject: Competition ; Strategy Variables ; Demand Uncertainty ; Preismanagement ; Sortiment ; Wettbewerbsstrategie ; Duopol ; Spieltheorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Reisinger, Markus ; Reßner, Ludwig
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München, Volkswirtschaftliche Fakultät
• (where): München
• (when): 2007

Further information

• DOI: doi:10.5282/ubm/epub.1916
• Handle: http://hdl.handle.net/10419/104222
• URN: urn:nbn:de:bvb:19-epub-1916-9
• Last update: 10.03.2025, 11:44 AM CET