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Market Size and Substitutability in Imperfect Competition: A Bertrand-Edgeworth-Chamberlin Model

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  • Benassy, Jean-Pascal

Abstract

This paper examines the role of market size in a model of price competition with imperfect substitutes that bridges the Chamberlin and Bertrand-Edgeworth approaches. The author investigates the role of two fundamental parameters in the existence of an equilibrium: the market size, given by the number of competitors, and the degree of substitutability. He proves that (1) for a given number of competitors, a sufficiently large, but finite, degree of substitutability entails nonexistence; and (2) conversely, for a given upper bound on the degree of substitutability, a sufficiently large number of competitors ensures existence. He finally investigates the proximity of an equilibrium (when it exists) to a "competitive outcome," and finds that both high substitutability and large market size are a condition for competitiveness. Copyright 1989 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 56 (1989)
Issue (Month): 2 (April)
Pages: 217-34

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Handle: RePEc:bla:restud:v:56:y:1989:i:2:p:217-34

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Cited by:
  1. BOCCARD, Nicolas & WAUTHY, Xavier, . "Equilibrium payoffs in a Bertrand-Edgeworth model with product differentiation," CORE Discussion Papers RP -1867, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Sinitsyn, Maxim, 2008. "Characterization of the support of the mixed strategy price equilibria in oligopolies with heterogeneous consumers," Economics Letters, Elsevier, vol. 99(2), pages 242-245, May.
  3. Kaas, Leo & Madden, Paul, 1999. "Equilibrium Involuntary Unemployment under Oligempory," Economics Series 68, Institute for Advanced Studies.
  4. J-Fr. Fagnart & Omar Licandro & H. R. Sneessens, . "Capacity utilization and market power," Working Papers 96-12, FEDEA.
  5. Daron Acemoglu & Asuman Ozdaglar, 2005. "Competition and Efficiency in Congested Markets," NBER Working Papers 11201, National Bureau of Economic Research, Inc.
  6. Sinitsyn, Maxim, 2009. "Price dispersion in duopolies with heterogeneous consumers," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 197-205, March.
  7. Wambach, Achim, 1999. "Bertrand competition under cost uncertainty," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 941-951, October.
  8. Canoy, Marcel & Weddepohl, Claus, 1995. "Alternative conjectures in a Bertrand-Edgeworth model," European Journal of Political Economy, Elsevier, vol. 11(3), pages 577-598, September.
  9. Vives, Xavier, 2004. "Innovation and Competitive Pressure," CEPR Discussion Papers 4369, C.E.P.R. Discussion Papers.
  10. repec:ebl:ecbull:v:12:y:2005:i:11:p:1-8 is not listed on IDEAS
  11. Antoine D'Autume, 1992. "Théorie des jeux et marché," Cahiers d'Économie Politique, Programme National Persée, vol. 20(1), pages 155-165.
  12. Tasnádi, Attila, 2001. "A Bertrand-Edgeworth-oligopóliumok. Irodalmi áttekintés
    [Bertrand-Edgeworth oligopolies - a survey of the literature]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1081-1092.
  13. Erdem Basci & Ismail Saðlam, 2001. "Bertrand-Edgeworth Equilibrium in a Cash-Advance Economy," Departmental Working Papers 0104, Bilkent University, Department of Economics.
  14. Thepot, Jacques, 1995. "Bertrand oligopoly with decreasing returns to scale," Journal of Mathematical Economics, Elsevier, vol. 24(7), pages 689-718.

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