Abstract

https://ssrn.com/abstract=2586265
 


 



Non-Linear Pricing Competition with Private Capacity Information


Hamid Nazerzadeh


University of Southern California - Marshall School of Business

Georgia Perakis


Massachusetts Institute of Technology (MIT) - Sloan School of Management

March 27, 2015


Abstract:     
We study a common agency model with informed principals consisting of two capacity-constrained suppliers and a single retailer. The capacity of each supplier is her private information. Conditioned on their capacities, the suppliers simultaneously and non-cooperatively offer quantity-price schedules to the retailer. Then, the retailer decides on the quantities to purchase from each supplier in order to maximize his own utility. We prove the existence of a (pure strategy) Nash equilibrium for this game. We show that at the equilibrium each (infinitesimal) unit of the supply is assigned a marginal price which is independent of the capacities and depends only on the valuation function of the retailer and the distribution of the capacities. In addition, the supplier with the larger capacity sells all her supply.

Number of Pages in PDF File: 25

Keywords: common agency, informed principals, supply chain, non-linear pricing

JEL Classification: D43


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Date posted: March 29, 2015 ; Last revised: March 31, 2015

Suggested Citation

Nazerzadeh, Hamid and Perakis, Georgia, Non-Linear Pricing Competition with Private Capacity Information (March 27, 2015). Available at SSRN: https://ssrn.com/abstract=2586265 or http://dx.doi.org/10.2139/ssrn.2586265

Contact Information

Hamid Nazerzadeh (Contact Author)
University of Southern California - Marshall School of Business ( email )
Bridge Memorial Hall
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~nazerzad/

Georgia Perakis
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
77 Massachusetts Ave.
E62-416
Cambridge, MA 02142
United States

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