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Driver, Ciaran and Goffinet, Fabrice (1998) 'Investment under Demand Uncertainty, Ex-Ante Pricing, and Oligopoly.' Review of Industrial Organization, 13 (4). pp. 409-423.

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Abstract

This paper considers the capacity choice of duopolists who set price ex-ante under demand uncertainty with risk-neutrality. The duopolists compete for market shares on the basis of availability of supply, rather than by price competition. Collusive pricing coexists with Cournot–Nash capacity choice. A formal model is presented, where the market share of each firm may deviate from the certainty share due to rationing. With shares reflecting different costs, capacity utilisation for the lower cost firm is expected to be substantially lower. The implications for the price-cost margin and capacity formation are also explored.

Item Type: Journal Article
SOAS Departments & Centres: Departments and Subunits > School of Finance & Management
Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management
ISSN: 0889938X
DOI (Digital Object Identifier): https://doi.org/10.1023/A:1007747212208
Date Deposited: 15 Aug 2015 15:20
URI: https://eprints.soas.ac.uk/id/eprint/20509

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