A storable good market with intertemporal cost variations

A storable good market with intertemporal cost variations

Wednesday, 27 November 2019, 12:00-13:15

Room: Α2-3

Presenter: Antoniou Fabio , University of Ioannina

In a storable good market, we investigate a firm's pricing policy and the welfare effects associated with the firm's ability to commit to future prices in the presence of time-varying production costs. We show that, if costs are expected to increase, the firm's lack of commitment leads to lower prices than full commitment when consumer storage costs are relatively small and demand is not too convex. This enhances consumer surplus and, under certain circumstances, total welfare. For intermediate consumer storage costs, full commitment generally benefits consumers and, a fortiori, the economy. Our analysis provides potentially significant empirical and policy implications.

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