Preemption in Capacity and Price Determination: A Study of Endogenous Timing of Decisions for Homogeneous Markets

29 Pages Posted: 21 Mar 2001

See all articles by Werner Guth

Werner Guth

Max Planck Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Sandra Gueth

University of Bielefeld

Date Written: June 2000

Abstract

Endogenous timing can help to derive the time structure of decision making instead of assuming it as exogenously given. In our study we consider a homogeneous market where, like in the model of Kreps and Scheinkman (1983), sellers determine sales capacities before prices. Sellers must serve customers, but at higher costs when demand exceeds capacitiy. Our model allows for preemption in capacity as well as in price determination. Since preemption means to decide before the random choice of cost parameters reflecting the stochastic nature of (excess) capacity costs, preemptive commitments are no obviously better timing dispositions.

JEL Classification: D4, D8, D2, L1

Suggested Citation

Güth, Werner and Gueth, Sandra, Preemption in Capacity and Price Determination: A Study of Endogenous Timing of Decisions for Homogeneous Markets (June 2000). CESifo Working Paper Series No. 309. Available at SSRN: https://ssrn.com/abstract=263522

Werner Güth (Contact Author)

Max Planck Institute of Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Sandra Gueth

University of Bielefeld

ZiF, Wellenberg 1
Department of Economics
33615 Bielefeld
Germany

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