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Essays on capacity-constrained pricing

Abstract : This Ph.D. thesis is composed of three chapters. Since Kreps and Scheinkman's seminal article (1983) a large number of papers have analyzed capacity constraints' potential to relax price competition. However, the majority of the ensuing literature has assumed that products are either perfect or very close substitutes. Therefore very little is known about the interaction between capacity constraints and local monopoly power. The aim of the present paper is to shed light on this question using a standard Hotelling setup. The high level of product dierentiation results in a variety of equilibrium firm behavior and it generates at least one pure-strategy equilibrium for any capacity level. The second chapter, "Bertrand-Edgeworth Competition with Substantial Product Differentiation", studies the price-setting behavior of a monopoly facing two capacity constraints: one on the number of consumers it can serve, the other on the total amount of products it can sell. Facing two consumer groups that difer in their demands and the distribution of their willingness-to-pay, the monopoly's optimal non-linear pricing strategy consists of offering one or two price-quantity bundles. The characterization of the firm's optimal pricing as a function of its two capacities reveals a rich structure that also gives rise to some surprising results. In particular, I show that prices are non-monotonic in capacity levels. Moreover, there always exists a range of parameters in which weakening one of the capacity constraints decreases consumer surplus. In the long run, when the firms can choose how much capacity to build, prices and consumer surplus are monotonic in capacity costs. The third chapter, "Competition with Dual Capacity Constraints", studies duopoly pricing under dual capacity constraints, limiting both the total quantity and the number of consumers served. It extends both the analysis of monopoly pricing with dual capacity constraints and the symmetric models of Bertrand-Edgeworth competition with a singular capacity. By isolating parameter regions where a symmetric pure-strategy equilibrium exists, I nd that several types of equilibria are possible, depending on the model's specications. For some of them, duopoly prices are identical to monopoly prices. Equilibrium prices are non-monotonic in capacity levels if consumers' valuations are suciently heterogeneous. Moreover, I show that despite their ability to price discriminate, competition may lead firms to charge identical prices across markets.
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Robert Somogyi. Essays on capacity-constrained pricing. Economics and Finance. Université Paris-Saclay, 2016. English. ⟨NNT : 2016SACLX024⟩. ⟨tel-01496837⟩



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