Abstract
In a two-stage model of duopolistic capacity choice and subsequent price competition, consumer switching costs can deter some consumers from seeking service at a low-price firm that lacks sufficient capacity to serve the entire market. In this setting, firms' residual demand functions are aggregatedfrom thefirm-selection decisions of individual consumers based on firms' prices and their induced degrees of service reliability. If consumers are approximately risk neutral with respect to service reliability, then capacity-constrained duopoly competition has a unique, subgame-perfect equilibrium in which firms choose Cournot capacities and prices. The equilibrium robustness of Cournot behavior extends to duopoly markets in which consumer switching costs are induced by subscription pricing.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
