Spatial competition and price discrimination with capacity constraints

Arbeitspapier

We characterize mixed-strategy equilibria when capacity constrained suppliers can charge location-based prices to different customers. We establish an equilibrium with prices that weakly increase in the costs of supplying a customer. Despite prices above costs and excess capacities, each supplier exclusively serves its home market in equilibrium. Competition yields volatile market shares and an inefficient allocation of customers to firms. Even ex-post cross-supplies may restore efficiency only partly. We show that consumers may benefit from price discrimination whereas the the firms make the same profits as with uniform pricing. We use our findings to discuss recent competition policy cases and provide hints for a more refined coordinated-effects analysis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 1912

Classification and Topics

• Classification: Wirtschaft ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Monopolization; Horizontal Anticompetitive Practices ; Metals and Metal Products; Cement; Glass; Ceramics
• Subject: Bertrand-Edgeworth ; capacity constraints ; inefficient competition ; spatial price discrimination ; subcontracting ; transport costs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hunold, Matthias ; Muthers, Johannes
• Event: Veröffentlichung
• (who): Johannes Kepler University of Linz, Department of Economics
• (where): Linz
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/207125
• Last update: 10.03.2025, 11:44 AM CET