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Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU) >
Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW), Universität Erlangen-Nürnberg >
IWQW Discussion Paper Series, FAU Erlangen-Nürnberg >
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http://hdl.handle.net/10419/29551
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| Title: | | Production under uncertainty: a characterization of welfare enhancing and optimal price caps  |
| Authors: | | Grimm, Veronika Zoettl, Gregor |
| Issue Date: | | 2008 |
| Series/Report no.: | | IWQW discussion paper series 02/2008 |
| Abstract: | | We analyze the effect of price caps on equilibrium production and welfare in oligopoly under demand uncertainty. We find that high price caps always increase production and welfare as compared to the situation without price cap. Price caps close to marginal cost may lead to zero production, depending on the nature of uncertainty. We characterize the optimal price cap and show that typically, the optimal price cap is bounded away from marginal cost. |
| Subjects: | | Demand uncertainty Cournot competition price caps |
| JEL: | | D43 L13 D41 D42 D81 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IWQW Discussion Paper Series, FAU Erlangen-Nürnberg
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