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Bertrand-Edgeworth Duopoly with Proportional Residual Demand

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  • Allen, Beth
  • Hellwig, Martin

Abstract

A complete characterization is given for the prices charged by Bertrand-Edgeworth duopolists with capacity constraints. In general, for the game in which firms' strategy spaces consist of price offers, Nash equilibrium involves nondegenerate mixed strategi es. Equilibria never extend below the highest competitive price. With tw o firms, the Bertrand-Edgeworth model displays a bias for the highest of several market clearing prices. Moreover, these strategies never stop short of the lowest monopoly price. If firms are of unequal siz e, the larger firm assigns positive probability to a monopoly price, possibly even to several monopoly prices. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 34 (1993)
Issue (Month): 1 (February)
Pages: 39-60

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Handle: RePEc:ier:iecrev:v:34:y:1993:i:1:p:39-60

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Cited by:
  1. Tasnádi, Attila, 2001. "A Bertrand-Edgeworth-oligopóliumok. Irodalmi áttekintés
    [Bertrand-Edgeworth oligopolies - a survey of the literature]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1081-1092.
  2. Szech, Nora & Weinschenk, Philipp, 2013. "Rebates in a Bertrand game," Journal of Mathematical Economics, Elsevier, vol. 49(2), pages 124-133.
  3. Roy Chowdhury, Prabal, 2007. "Bertrand-Edgeworth equilibrium with a large number of firms," MPRA Paper 3353, University Library of Munich, Germany.
  4. Maxim Sinitsyn, 2007. "Characterization Of The Support Of The Mixed Strategy Price Equilibria In Oligopolies With Heterogeneous Consumers," Departmental Working Papers 2007-08, McGill University, Department of Economics.
  5. Gabriella Chiesa, . "Incentive-based Lending Capacity, Competition and Regulation in Banking," Working Papers 92, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Hirata, Daisuke, 2008. "Bertrand-Edgeworth Equilibrium in Oligopoly," MPRA Paper 7946, University Library of Munich, Germany.
  7. G. Chiesa, 2001. "Competition and Regulation in Banking," Working Papers 397, Dipartimento Scienze Economiche, Universita' di Bologna.

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