Price competition with population uncertainty
AbstractThe Bertrand paradox holds that price competition among at least two firms eliminates all profits in equilibrium, when firms have identical constant marginal costs. This assumes that the number of competitors is common knowledge among firms. If firms are uncertain about the number of their competitors, there is no pure strategy equilibrium. But in mixed strategies an equilibrium exists. In this equilibrium it takes a large market to wipe out profits. Thus, with population uncertainty, two are not enough for competition.
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Bibliographic InfoArticle provided by Elsevier in its journal Mathematical Social Sciences.
Volume (Year): 58 (2009)
Issue (Month): 2 (September)
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Web page: http://www.elsevier.com/locate/inca/505565
Bertrand paradox Population uncertainty Price competition;
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