Imperfect Competition with Costly Disposal

This paper studies the effect of disposal costs on consumer surplus and firms’ profits. First, we analyze a monopolist producing inventories either early at low cost with little information about demand, or later more yet higher cost. Unsold products are discarded. The firm forgoes an production advantage if only demand uncertainty both simultaneously high. Expected decreases in its cost, lowers to mitigate costs, resulting lower expected profit surplus. Similar results hold for firms competing sales volumes unobserved inventories. Ex-ante symmetric may choose different timings. substitutes thereby affecting firm’s advantage. Accordingly, increase Firms adjust their timing, discontinuous change