Title: Consumer Choice and Cournot Behavior in Capacity-Constrained Duopoly Competition
Abstract: In a two-stage model of duopolistic capacity choice and subsequent price competition, consumer switching costs can deter some consumers from seeking service at a low-price firm that lacks sufficient capacity to serve the entire market. In this setting, firms' residual demand functions are aggregatedfrom thefirm-selection decisions of individual consumers based on firms' prices and their induced degrees of service reliability. If consumers are approximately risk neutral with respect to service reliability, then capacity-constrained duopoly competition has a unique, subgame-perfect equilibrium in which firms choose Cournot capacities and prices. The equilibrium robustness of Cournot behavior extends to duopoly markets in which consumer switching costs are induced by subscription pricing.
Publication Year: 1993
Publication Date: 1993-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 30
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot