Spatial competition and price discrimination with capacity constraints |
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| Institution: | 1. University of Siegen, Unteres Schloß 3, 57068 Siegen, Germany;2. Johannes Kepler Universität Linz, Altenberger Straße 69, 4040 Linz, Austria;1. CRESE EA3190 and Institut Universitaire de France, Univ. Bourgogne Franche-Comté, Besançon F-25000, France;2. CRESE EA3190, Univ. Bourgogne Franche-Comté, Besançon F-25000, France;1. Compass Lexecon, Kö-Bogen, Königsallee 2b, Düsseldorf 40212, Germany;2. Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine-University Düsseldorf, Universitätsstraße 1, Düsseldorf 40225, Germany;3. Centrum für angewandte Wirtschaftsforschung Münster (CAWM), Westfälische Wilhelms-Universität Münster, Am Stadtgraben 9, Münster 48143, Germany;1. Telecom ParisTech, Department of Economics and Social Sciences, 46 rue Barrault, Paris 75013, France;2. Chalmers University of Technology, Department of Technology, Management and Economics, Vera Sandberg Alle 8, Gothenburg 411 33, Sweden;3. University of Cape Town, School of Economics, Rondebosch, 7701, Cape Town, South Africa;1. University of Central Florida, United States;2. The University of Edinburgh, Scotland;3. Universitat de les Illes Balears, Spain;1. Department of Economics, Krannert School of Management, Purdue University, 403 West State Street, West Lafayette, IN 47907-2056, United States;2. CESifo, Germany |
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| 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 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. |
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