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Bertrand-Edgeworth Competition in an Almost Symmetric Oligopoly

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  • Massimo A. De Francesco
  • Neri Salvadori

Abstract

We analyze a Bertrand-Edgeworth game in a homogeneous product industry, under efficient rationing and constant (and identical across firms) marginal cost until full capacity utilization. We solve for the unique equilibrium in a subset of the no pure strategy equilibrium region of the capacity space in which differences in individual capacities are sufficiently small.

Suggested Citation

  • Massimo A. De Francesco & Neri Salvadori, 2013. "Bertrand-Edgeworth Competition in an Almost Symmetric Oligopoly," Studies in Microeconomics, , vol. 1(2), pages 213-219, December.
    • Handle: RePEc:sae:miceco:v:1:y:2013:i:2:p:213-219
    DOI: 10.1177/2321022213501259
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    References listed on IDEAS

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    1. Vives, Xavier, 1986. "Rationing rules and Bertrand-Edgeworth equilibria in large markets," Economics Letters, Elsevier, vol. 21(2), pages 113-116.
    2. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 1-26.
    3. Partha Dasgupta & Eric Maskin, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, II: Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(1), pages 27-41.
    4. Osborne, Martin J. & Pitchik, Carolyn, 1986. "Price competition in a capacity-constrained duopoly," Journal of Economic Theory, Elsevier, vol. 38(2), pages 238-260, April.
    5. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    6. De Francesco, Massimo A. & Salvadori, Neri, 2008. "Bertrand-Edgeworth games under oligopoly with a complete characterization for the triopoly," MPRA Paper 10767, University Library of Munich, Germany, revised 26 Sep 2008.
    7. Davidson, Carl & Deneckere, Raymond, 1984. "Horizontal mergers and collusive behavior," International Journal of Industrial Organization, Elsevier, vol. 2(2), pages 117-132, June.
    8. Hirata Daisuke, 2009. "Asymmetric Bertrand-Edgeworth Oligopoly and Mergers," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, July.
    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.
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    Citations

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    Cited by:

    1. Charlson, G., 2021. "Rating the Competition: Seller Ratings and Intra-Platform Competition," Cambridge Working Papers in Economics 2106, Faculty of Economics, University of Cambridge.
    2. Massimo A. De Francesco & Neri Salvadori, 2022. "Bertrand–Edgeworth oligopoly: Characterization of mixed strategy equilibria when some firms are large and the others are small," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 803-824, July.
    3. Jacobs, Martin & Requate, Till, 2016. "Demand rationing in Bertrand-Edgeworth markets with fixed capacities: An experiment," Economics Working Papers 2016-03, Christian-Albrechts-University of Kiel, Department of Economics.
    4. Charlson, G., 2020. "Searching for Results: Optimal Platform Design in a Network Setting," Cambridge Working Papers in Economics 20118, Faculty of Economics, University of Cambridge.
    5. Armstrong, Mark & Vickers, John, 2018. "Patterns of Competition with Captive Customers," MPRA Paper 90362, University Library of Munich, Germany.
    6. Jacobs, Martin & Requate, Till, 2016. "Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence," Economics Working Papers 2016-01, Christian-Albrechts-University of Kiel, Department of Economics.
    7. Zhiqi Chen & Gang Li, 2018. "Horizontal Mergers In The Presence Of Capacity Constraints," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1346-1356, April.
    8. Elliott, M. & Galeotti., A. & Koh., A. & Li, W., 2021. "Market Segmentation Through Information," Cambridge Working Papers in Economics 2105, Faculty of Economics, University of Cambridge.
    9. De Francesco, Massimo A. & Salvadori, Neri, 2016. "Bertrand-Edgeworth games under triopoly: the equilibrium strategies when the payoffs of the two smallest firms are proportional to their capacities," MPRA Paper 69999, University Library of Munich, Germany.
    10. De Francesco, Massimo A. & Salvadori, Neri, 2015. "Bertrand-Edgeworth games under triopoly: the payoffs," MPRA Paper 64638, University Library of Munich, Germany.

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    More about this item

    Keywords

    Bertrand-Edgeworth competition; mixed strategy equilibrium; almost symmetric oligopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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