Low price signals high capacity. (English) Zbl 1290.91116
Summary: We study pricing in a model where buyers are homogeneous and sellers have either capacity one or two. We show that if buyers observe prices but not capacities then an equilibrium exists where sellers of capacity two post lower prices than sellers of capacity one. The equilibrium satisfies the intuitive criterion.
MSC:
| 91B54 | Special types of economic markets (including Cournot, Bertrand) |
| 91B24 | Microeconomic theory (price theory and economic markets) |
| 91B40 | Labor market, contracts (MSC2010) |
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