Production under uncertainty : a characterization of welfare enhancing and optimal price caps

Veronika Grimm; Gregor Zoettl

We analyze the effect of price caps on equilibrium production and welfare in oligopoly under demand uncertainty. We find that high price caps always increase production and welfare as compared to the situation without price cap. Price caps close to marginal cost may lead to zero production, depending on the nature of uncertainty. We characterize the optimal price cap and show that typically, the optimal price cap is bounded away from marginal cost. -- Demand uncertainty, Cournot competition, price caps

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Year of publication:	2008
Authors:	Grimm, Veronika ; Zoettl, Gregor
Publisher:	Erlangen : Univ., Inst. für Wirtschaftspolitik und Quantitative Wirtschaftsforschung
Subject:	Anreizregulierung \| Incentive regulation \| Produktion \| Production \| Entscheidung unter Unsicherheit \| Decision under uncertainty \| Nachfrage \| Demand \| Oligopol \| Oligopoly \| Nash-Gleichgewicht \| Nash equilibrium \| Wohlfahrtsanalyse \| Welfare analysis \| Theorie \| Theory

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Extent:	Online-Ressource (26 S.)
Series:	IWQW discussion paper series. - Erlangen : [Verlag nicht ermittelbar], ISSN 1867-6707, ZDB-ID 2523749-4. - Vol. 02/2008
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	Systemvoraussetzungen: Acrobat Reader
Other identifiers:	hdl:10419/29551 [Handle]
Classification:	D43 - Oligopoly and Other Forms of Market Imperfection ; L13 - Oligopoly and Other Imperfect Markets ; D41 - Perfect Competition ; D42 - Monopoly ; D81 - Criteria for Decision-Making under Risk and Uncertainty
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10003894585