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The Competitive Outcome as the Equilibrium in an Edgeworthian Price-Quantity Model

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  • Dixon, Huw David

Abstract

This paper considers a model of price-setting oligopoly with perfectly informed consumers, where firms have strictly-convex cost functions. In the standard Bertrand-Edgeworth model, there exists no pure-strategy Nash equilibrium. The author allows firms to choose both price and the quantity that they are willing to sell, output being the minimum of this quantity and demand. Firms cannot offer to sell a quantity that would bankrupt them. The paper shows that if there are enough firms, then an equilibrium exists and, in all equilibria, firms set the competitive price and each produce their competitive output. Copyright 1992 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 102 (1992)
Issue (Month): 411 (March)
Pages: 301-09

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Handle: RePEc:ecj:econjl:v:102:y:1992:i:411:p:301-09

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Cited by:
  1. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth equilibrium with a large number of firms," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-12, Indian Statistical Institute, New Delhi, India.
  2. Dechenaux, Emmanuel & Kovenock, Dan, 2003. "Endogenous Rationing, Price Dispersion, and Collusion in Capacity Constrained Supergames," Purdue University Economics Working Papers 1164, Purdue University, Department of Economics.
  3. Berg Anita van den & Bos Iwan, 2011. "Collusion in a Price-Quantity Oligopoly," Research Memorandum 039, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  4. repec:hal:wpaper:halshs-00587866 is not listed on IDEAS
  5. Erdem Basci & Ismail SaĆ°lam, 2001. "Bertrand-Edgeworth Equilibrium in a Cash-Advance Economy," Departmental Working Papers 0104, Bilkent University, Department of Economics.
  6. Makoto Yano, 2006. "A price competition game under free entry," Economic Theory, Springer, vol. 29(2), pages 395-414, October.

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