Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111740
Authors: 
Czerny, Achim I.
Verhoef, Erik T.
Zhang, Anming
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-065/VIII
Abstract: 
This paper distinguishes uncertainty types that differ continuously with respect to the degree to which uncertainty affects the optimal price/price markup or optimal quantity. A monopoly example is used to show that seemingly strong assumptions on functional forms can represent a wide variety of different scenarios, while (implicit) assumptions on continuous uncertainty types can lead to quite special results. Monopoly examples of the newsboy problem type are further used to show that the optimal capacity level and the optimal composition of capacity in terms of the number and size of production units depends crucially on the type of uncertainty and the employed functional forms for utilities and costs.
Subjects: 
Continuous uncertainty types
demand uncertainty
cost uncertainty
monopoly
newsboy problem
JEL: 
D42
D80
L91
Document Type: 
Working Paper

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