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Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes

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  • Chowdhury, Prabal Roy

Abstract

Consider a Bertrand-Edgeworth duopoly with linear cost functions. If the firms produce to stock then no Nash equilibrium in pure strategies exists. If, however, the firms produce to order then all subgame perfect Nash equilibria involve the firms charging a price equal to marginal cost.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 88 (2005)
Issue (Month): 1 (July)
Pages: 61-65

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Handle: RePEc:eee:ecolet:v:88:y:2005:i:1:p:61-65

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  1. Tasnadi, Attila, 1999. "A two-stage Bertrand-Edgeworth game," Economics Letters, Elsevier, vol. 65(3), pages 353-358, December.
  2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  3. Maskin, Eric & Tirole, Jean, 1988. "A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand Curves, and Edgeworth Cycles," Econometrica, Econometric Society, vol. 56(3), pages 571-99, May.
  4. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  5. Mestelman, Stuart & Welland, Deborah & Welland, Douglas, 1987. "Advance production in posted offer markets," Journal of Economic Behavior & Organization, Elsevier, vol. 8(2), pages 249-264, June.
  6. Maskin, Eric, 1986. "The Existence of Equilibrium with Price-Setting Firms," American Economic Review, American Economic Association, vol. 76(2), pages 382-86, May.
  7. Tasnadi, Attila, 1999. "Existence of pure strategy Nash equilibrium in Bertrand-Edgeworth oligopolies," Economics Letters, Elsevier, vol. 63(2), pages 201-206, May.
  8. Levitan, Richard & Shubik, Martin, 1972. "Price Duopoly and Capacity Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 111-22, February.
  9. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  10. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
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