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Stability Analysis in a Bertrand Duopoly with Different Product Quality and Heterogeneous Expectations

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  • Luciano Fanti

    ()

  • Luca Gori

    ()

Abstract

We study the local stability properties of a nonlinear Bertrand duopoly with vertical differentiation and heterogeneous players under the hypotheses of both covered and uncovered markets. In the former case, the unique pure strategy Nash equilibrium can undergo a flip bifurcation when the extent of consumer’s heterogeneity increases. In the latter, the quality differential determines the stability of prices over time. Numerical evidence is provided to show the occurrence of endogenous fluctuations. Copyright Springer Science+Business Media New York 2013

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File URL: http://hdl.handle.net/10.1007/s10842-012-0134-9
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Bibliographic Info

Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 13 (2013)
Issue (Month): 4 (December)
Pages: 481-501

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Handle: RePEc:kap:jincot:v:13:y:2013:i:4:p:481-501

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Web page: http://springerlink.metapress.com/link.asp?id=105724

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Keywords: bifurcation; duopoly; heterogeneous expectations; price competition; vertical differentiation; C62; D43; L13; L15;

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