Equilibrium price dispersion under demand uncertainty: the roles of costlycapacity and market structure

When capacity is costly and prices are set in advance, firms facing uncerta in demand will sell output at multiple prices and limit the quantity availa ble at each price, I show that the optimal price strategy of a monopolist a nd the unique pure-strategy Nash equilibria of oligopolists both exhibit in trafirm price dispersion. Moreover, as the marker becomes more competitive, prices become more dispersed, a pattern documented in the airline industry , While generating similar predictions, the model differs from the revenue management literature because it disregards market segmentation and fare re strictions that screen customers.