Department of Economics

Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing

Department of Economics

University of Delaware

Working Paper #2006-01

Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing

James G Mulligan

ABSTRACT

This paper illustrates the importance of the role of long-run capacity constraints in a model explaining the effect of  real income and transportation cost on long-run lift-ticket prices and lift capacity in a competitive two-sector ski industry.  Despite the large number of game-theoretic models in the literature linking excess capacity to higher prices and limited entry, the model explains large increases in capacity and real prices over time despite a static number of skier-days per year without having to resort to an argument based on market power.   This approach, thus, has points in common with work by Sutton (1991 and 1998) on endogenous vertical differentiation and persistent market concentration. The distinguishing feature of this paper, however, is that it links endogenous changes in service capacity directly to changes in both quality and price.

 

The Lerner College is home to a state-of-the-art financial trading facility, the $1.4 million student-led Blue Hen Investment Fund, a student-managed restaurant and hotel, a high-technology development center of a global bank and a start-up experience for students with new business ideas.

Lerner College faculty - like Anu Sivaraman, who is among Social Media Marketing Magazine’s “Top 100 Marketing Professors on Twitter” and MBAprograms.org’s “Top 50 Marketing Professors on Twitter” - are thought leaders who command attention from influential business audiences, economists and policy makers.

All Lerner College departments offer experience-driven learning and emphasize evidence-based analytics methods to enrich the student experience. Here, finance students visit New York City’s financial districts for a first-hand look at markets trading and to meet with UD alumni.

Charles W. Horn, AS75, and wife Patricia, recently made a $3 million commitment to enhance and expand entrepreneurial studies.

  • Alfred Lerner College of Business & Economics
    303 Alfred Lerner Hall  •  Newark, DE 19716  •  USA  •  ©