Watanabe, M. and Moller, M. (2016). Competition in the presence of individual demand uncertainty RAND Journal of Economics, 47(2):273--292.
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Affiliated authorMakoto Watanabe
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Publication year2016
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JournalRAND Journal of Economics
This article offers a tractable model of (oligopolistic) competition in differentiated product markets characterized by individual demand uncertainty. The main result shows that, in equilibrium, firms offer advance purchase discounts and that these discounts are larger than in the monopolistic benchmark. Competition reduces welfare by increasing the fraction of consumers who purchase in advance, that is, without (full) knowledge of their preferences.