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Existence of pure strategy equilibrium in Bertrand-Edgeworth games with imperfect divisibility of money

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Author Info
Massimo A. De Francesco () (Department of Economics, University of Siena)

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Abstract

This paper incorporates imperfect divisibility of money in a price game where a given number of identical firms produce a homogeneous product at constant unit cost up to capacity. We find necessary and sufficient conditions for the existence of a pure strategy equilibrium. Unlike in the continuous action space case, with discrete pricing there may be a range of symmetric pure strategy equilibria - which we fully characterize - a range which may or may not include the competitive price. Also, we determine the maximum number of such equilibria when competitive pricing is itself an equilibrium.

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File URL: http://economicsbulletin.vanderbilt.edu/2008/volume12/EB-08L10034A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 12 (2008)
Issue (Month): 29 ()
Pages: 1-8
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Handle: RePEc:ebl:ecbull:v:12:y:2008:i:29:p:1-8

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Related research
Keywords: Bertrand-Edgeworth competition; Price game; Oligopoly; Pure strategy equilibrium; Discrete pricing.;

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Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

References listed on IDEAS
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  1. Vives, Xavier, 1986. "Rationing rules and Bertrand-Edgeworth equilibria in large markets," Economics Letters, Elsevier, vol. 21(2), pages 113-116. [Downloadable!] (restricted)
  2. Dixon, Huw David, 1993. "Integer Pricing and Bertrand-Edgeworth Oligopoly with Strictly Convex Costs: Is It Worth More Than a Penny?," Bulletin of Economic Research, Blackwell Publishing, vol. 45(3), pages 257-68, July.
  3. Chaudhuri, Prabal Ray, 1996. "The contestable outcome as a Bertrand equilibrium," Economics Letters, Elsevier, vol. 50(2), pages 237-242, February. [Downloadable!] (restricted)
  4. Harrington, Joseph Jr., 1989. "A re-evaluation of perfect competition as the solution to the Bertrand price game," Mathematical Social Sciences, Elsevier, vol. 17(3), pages 315-328, June. [Downloadable!] (restricted)
  5. Roy Chowdhury, Prabal, 2008. "Bertrand-Edgeworth equilibrium with a large number of firms," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 746-761, May. [Downloadable!] (restricted)
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