Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/207125
Authors: 
Hunold, Matthias
Muthers, Johannes
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 1912
Abstract: 
We characterize mixed-strategy equilibria when capacity constrained suppliers can charge location-based prices to different customers. We establish an equilibrium with prices that weakly increase in the costs of supplying a customer. Despite prices above costs and excess capacities, each supplier exclusively serves its home market in equilibrium. Competition yields volatile market shares and an inefficient allocation of customers to firms. Even ex-post cross-supplies may restore efficiency only partly. We show that consumers may benefit from price discrimination whereas the the firms make the same profits as with uniform pricing. We use our findings to discuss recent competition policy cases and provide hints for a more refined coordinated-effects analysis.
Subjects: 
Bertrand-Edgeworth
capacity constraints
inefficient competition
spatial price discrimination
subcontracting
transport costs
JEL: 
L11
L41
L61
Document Type: 
Working Paper

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