Skip to content
Journal article

Optimal Pricing with Speculators and Strategic Consumers

Management Science, vol. 56, issue 1 (2010) pp. 25-40

  • 87


    Mendeley users who have this article in their library.
  • 27


    Citations of this article.
  • N/A


    ScienceDirect users who have downloaded this article.
Sign in to save reference


This paper studies a monopolist firm selling a fixed capacity. The firm sets a price before demand uncertainty is resolved. Speculators may enter the market purely with the intention of resale, which can be profitable if demand turns out to be high. Consumers may strategically choose when to purchase, and they may also choose to purchase from the firm or from the speculators. We characterize equilibrium prices and profits and analyze the long-run capacity decisions of the firm. There are three major findings. First, the presence of speculators increases the firm's expected profits even though the resale market competes with the firm. Second, by facilitating resale, the firm can mimic dynamic pricing outcomes and enjoy the associated benefits while charging a fixed price. Third, speculative behavior may generate incentives for the seller to artificially restrict supply, and thus may lead to lower capacity investments. We also explore several model extensions that highlight the robustness of our results. [ABSTRACT FROM AUTHOR]

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document

Get full text


  • Xuanming Su

Cite this document

Choose a citation style from the tabs below