We address the simultaneous determination of pricing, production, and capacity investment decisions by a monopolistic firm in a multi-period setting under demand uncertainty. We analyze the optimal decision with particular emphasis on the relationship between price and capacity. We consider models that allow for either bi-directional price changes or models with markdowns only, and in the latter case we prove that capacity and price are strategic substitutes.
Production and Operations Managementvol.
20, (January 01, 2011):