Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/29551
Authors: 
Grimm, Veronika
Zoettl, Gregor
Year of Publication: 
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

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