Document Type

Discussion Paper

Publication Date

6-1-2018

CFDP Number

2136R3

CFDP Revision Date

September 2018, March 2019, February 2020

CFDP Pages

48

Journal of Economic Literature (JEL) Code(s)

D21, D43, L13

Abstract

This paper develops an oligopoly model in which firms first choose capacity and then compete in prices in a series of advance-purchase markets. We show that when the elasticity of demand falls across periods, strong competitive forces prevent firms from utilizing intertemporal price discrimination. We then enrich the model by allowing firms to use inventory controls, or sales limits assigned to individual prices. We show that competing firms can profitably use inventory controls. Thus, although typically viewed as a tool to manage demand uncertainty, we show that inventory controls can also facilitate price discrimination in oligopoly.

Included in

Economics Commons

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