Firms' Strategic Choices under Demand Uncertainty (Preliminary and Incomplete)
نویسنده
چکیده
This paper investigates how r̄ms choose prices and production capacity when facing stochastic demand. With demand uncertainty, ̄rms face demand curves for their goods which implicitly subsume the selling mechanism adopted in the markets for these goods. The selling mechanisms considered in this analysis are bidding markets or auctions, and take-it-or-leave-it sales. They have di®erent implications for the respective expected demand curves the r̄ms face, and hence for the ̄rms' capacity choices. These implications entail consequences for welfare. It is shown that auctions yield higher expected comsumer welfare than take-it-orleave-it sales when production costs are high, while take-it-or-leave-it sales enhance welfare when production costs are low.
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