A dynamic model of Bertrand competition with entry
AbstractThis paper analyzes a simple, repeated game of simultaneous entry and pricing. We report a surprising property of the symmetric equilibrium solution: If the number of potential competitors is increased above two, the market breaks down with higher probability, and the competitive outcome becomes less likely. More potential competition lowers welfare - another Bertrand paradox. The model can also be applied to auctions to explore whether a revenue maximizing auctioneer should restrict the number of bidders if bidder participation is costly.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 17 (1999)
Issue (Month): 4 (May)
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Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Elmar Wolfstetter & Walter Elberfeld, 1997. "A Dynamic Model of Bertrand Competition with Entry," Microeconomics 9701003, EconWPA.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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