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DEMAND RATIONING RULES: BEYOND EFFICIENCY AND PROPORTIONALITY
Ristić, Bojan
Njegovan, Nikola
Abstract: This paper examines demand rationing mechanisms in oligopoly models beyond the classical efficient and proportional rules, with a focus on capacity-constrained price competition. Efficient rationing assumes that consumers with the highest willingness to pay are served first by the lower-priced firm. In contrast, proportional rationing assigns all consumers an equal chance to buy. We introduce a general framework parameterised by α, encompassing both classical rules as special cases and enabling the modelling of switching-cost-based rationing. Such a framework captures the impact of consumer inertia, search frictions, or contractual obligations on residual demand. Our analysis reveals that different rationing rules have a significant effect on equilibrium outcomes and firms’ strategic choices, particularly in terms of capacity and pricing. Departures from the efficient rule may weaken or amplify competitive intensity, thus reshaping market power. These insights directly affect competition protection policy, particularly in the areas of horizontal restrictive agreements, abuse of dominant position, and merger control. The findings advocate for a more nuanced integration of rationing rules into oligopoly models and policy tools.
engleski
2025
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Keywords: capacities, Bertrand-Edgeworth competition, rationing rules, switching costs.