Competition, price dispersion and capacity constraints: the case of the U.S. corn seed industry

abstract In this paper we examine the effect of competition on price dispersion and argue that is contingent ability firms to meet market demand. Our comparative static results show among symmetrically capacity-unconstrained firms, or with asymmetric capacities leads an overall increase along distribution function. To investigate these findings empirically, use a novel data set from U.S. corn seed industry firm farm level sales information for conventional genetically modified seeds between 2004 2009. We estimate empirical model using Fixed Effect Instrumental Variable Quantile Regression find evidence consistent theory. The analysis also shows charge premium, confirming positive relationship product availability pricing found in our theoretical model.