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Bertrand-Edgeworth Equilibria when Firms Avoid Turning Customers Away

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  • Dixon, Huw

Abstract

This paper provides a simple solution to the problem of nonexistence of pure-strategy equilibria in Bertrand-Edgeworth models with strictly convex costs. The voluntary-trading constraint in standard Bertrand-Edgeworth models is generalized to allow for there being costs incurred when customers are turned away. So long as the industry is sufficiently large, the presence of such costs ensures that the competitive price will be an equilibrium. There will be other single price equilibria, but if the offense costs are small, all equilibria will be close to the competitive outcome. Copyright 1990 by Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 39 (1990)
Issue (Month): 2 (December)
Pages: 131-46

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Handle: RePEc:bla:jindec:v:39:y:1990:i:2:p:131-46

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Cited by:
  1. Krishnendu Dastidar, 2001. "Collusive outcomes in price competition," Journal of Economics, Springer, vol. 73(1), pages 81-93, February.
  2. Makoto Yano & Takashi Komatsubara, 2012. "Price Competition or Tacit Collusion," KIER Working Papers 807, Kyoto University, Institute of Economic Research.
  3. Argenton, Cédric & Müller, Wieland, 2012. "Collusion in experimental Bertrand duopolies with convex costs: The role of cost asymmetry," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 508-517.
  4. Roberts Waddle, 2005. "Strategic Profit Sharing Between Firms: The Bertrand Model," Economics Working Papers we050902, Universidad Carlos III, Departamento de Economía.
  5. Andersson, Ola & Argenton, Cédric & Weibull, Jörgen, 2010. "Robustness to strategic uncertainty in price competition," Working Paper Series in Economics and Finance 0726, Stockholm School of Economics, revised 08 Apr 2010.
  6. Novshek, William & Chowdhury, Prabal Roy, 2003. "Bertrand equilibria with entry: limit results," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 795-808, June.
  7. Erdem Basci & Ismail Saðlam, 2001. "Bertrand-Edgeworth Equilibrium in a Cash-Advance Economy," Departmental Working Papers 0104, Bilkent University, Department of Economics.
  8. Alberto Iozzi, 2004. "Spatial duopoly under uniform delivered pricing when firms avoid turning customers away," The Annals of Regional Science, Springer, vol. 38(3), pages 513-529, 09.
  9. Chowdhury, Prabal Roy, 1999. "Bertrand-Edgeworth equilibria with unobservable output, uncoordinated consumers and large number of firms," Economics Letters, Elsevier, vol. 63(2), pages 207-211, May.
  10. Wambach, Achim, 1999. "Bertrand competition under cost uncertainty," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 941-951, October.
  11. Antón García Díaz & Praveen Kujal, 2003. "List Pricing And Pure Strategy Outcomes In A Bertrand-Edgeworth Duopoly," Economics Working Papers we034918, Universidad Carlos III, Departamento de Economía.
  12. Chia-Hung Sun & Fu-Chuan Lai, 2013. "Hotelling was right with decreasing returns to scale and a coalition-proof refinement," The Annals of Regional Science, Springer, vol. 50(3), pages 953-971, June.
  13. Prabal Roy Chowdhury, 2004. "Limit properties of Bertrand equilibria with exogenous entry," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-14, Indian Statistical Institute, New Delhi, India.
  14. Roy Chowdhury, Prabal, 2007. "Bertrand-Edgeworth equilibrium with a large number of firms," MPRA Paper 3353, University Library of Munich, Germany.
  15. Dastidar, Krishnendu Ghosh, 1997. "Comparing Cournot and Bertrand in a Homogeneous Product Market," Journal of Economic Theory, Elsevier, vol. 75(1), pages 205-212, July.
  16. Andersson, Ola & Argenton, Cédric & Weibull, Jörgen W., 2012. "Robustness to Strategic Uncertainty," Working Paper Series 910, Research Institute of Industrial Economics.

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