Capacity Choice under Monopoly, Flexible Price and Demand Uncertainty

1996 ◽  
Vol 63 (2) ◽  
pp. 526 ◽  
Author(s):  
Ciaran Driver ◽  
Sonia Abubacker ◽  
Georgios Argiris
Keyword(s):  
Demand Uncertainty ◽  
Capacity Choice

scholarly journals A model of entry-exit decisions and capacity choice under demand uncertainty

2003 ◽  
Vol 28 (3) ◽  
pp. 215-224 ◽  
Author(s):  
Murat Isik ◽  
Keith H. Coble ◽  
Darren Hudson ◽  
Lisa O. House
Keyword(s):  
Demand Uncertainty ◽  
Capacity Choice ◽  
Exit Decisions

Demand Uncertainty and Cost Behavior

2013 ◽  
Vol 89 (3) ◽  
pp. 839-865 ◽  
Author(s):  
Rajiv D. Banker ◽  
Dmitri Byzalov ◽  
Jose M. Plehn-Dujowich
Keyword(s):  
Demand Uncertainty ◽  
Manufacturing Sector ◽  
Cost Structure ◽  
Data Availability ◽  
Congestion Costs ◽  
Capacity Choice ◽  
Cost Behavior ◽  
Short Run ◽  
Using Data ◽  
The Relationship

ABSTRACT We investigate analytically and empirically the relationship between demand uncertainty and cost behavior. We argue that with more uncertain demand, unusually high realizations of demand become more likely. Accordingly, firms will choose a higher capacity of fixed inputs when uncertainty increases in order to reduce congestion costs. Higher capacity levels imply a more rigid short-run cost structure with higher fixed and lower variable costs. We formalize this “counterintuitive” argument in a simple analytical model of capacity choice. Following this logic, we hypothesize that firms facing higher demand uncertainty have a more rigid short-run cost structure with higher fixed and lower variable costs. We test this hypothesis for the manufacturing sector using data from Compustat and the NBER-CES Industry Database. Evidence strongly supports our hypothesis for multiple cost categories in both datasets. The results are robust to alternative specifications. Data Availability: All data used in this study are available from public sources.

Demand uncertainty and airport capacity choice

2013 ◽  
Vol 57 ◽  
pp. 91-104 ◽  
Author(s):  
Yibin Xiao ◽  
Xiaowen Fu ◽  
Anming Zhang
Keyword(s):  
Demand Uncertainty ◽  
Airport Capacity ◽  
Capacity Choice
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