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Nonuniform Bertrand Competition

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  • Mandy, David M

Abstract

The feasibility of Bertrand undercutting with nonuniform prices is established and properties are derived for Bertrand equilibrium in nonuniform price strategies. With free entry, equilibrium entails zero-profit minimum average cost production. If there is more than one producing firm, all prices collapse to a minimum average cost uniform price. An existence condition is compared to conditions from uniform price theory. Without free entry equilibrium, prices may not collapse to a uniform price. Positive profit may occur but all firms earn equal profit and incur equal marginal cost, while consumers pay average outlay no greater than marginal cost. Copyright 1992 by The Econometric Society.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 60 (1992)
Issue (Month): 6 (November)
Pages: 1293-30

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Handle: RePEc:ecm:emetrp:v:60:y:1992:i:6:p:1293-30

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Cited by:
  1. Farid Gasmi & Michel Moreaux & William Sharkey, 2000. "Strategic nonlinear pricing," Journal of Economics, Springer, vol. 71(2), pages 109-131, June.
  2. 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.
  3. Harrison, Mark & Kline, J. Jude, 2001. "Quantity competition with access fees," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 345-373, March.
  4. Marcel Canoy, 1994. "Natural monopoly and differential pricing," Journal of Economics, Springer, vol. 59(3), pages 287-309, October.
  5. Felix Hoeffler, 2006. "Mobile termination and collusion, revisited," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2006_16, Max Planck Institute for Research on Collective Goods.
  6. Arun Sundararajan, 2003. "Network Effects, Nonlinear Pricing and Entry Deterrence," Industrial Organization 0307002, EconWPA.
  7. Esteban, Susanna & Miyagawa, Eiichi, 2006. "Temptation, self-control, and competitive nonlinear pricing," Economics Letters, Elsevier, vol. 90(3), pages 348-355, March.
  8. Felix Höffler, 2009. "Mobile termination and collusion, revisited," Journal of Regulatory Economics, Springer, vol. 35(3), pages 246-274, June.
  9. Cheung, Francis K. & Wang, Xinghe, 1995. "Output, price, and welfare under nonlinear pricing in an imperfectly competitive industry," Journal of Economics and Business, Elsevier, vol. 47(4), pages 353-367, October.
  10. Makoto Yano, 2006. "A price competition game under free entry," Economic Theory, Springer, vol. 29(2), pages 395-414, October.

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