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Limit-pricing as Bertrand equilibrium

Author

Listed:
  • Prabal Roy Chowdhury

    (CSDILE, School of International Studies , Jawaharlal Nehru University , New Delhi - 110067, INDIA)

Abstract

We consider a Bertrand duopoly model with increasing returns to scale where one of the firms have a cost advantage and prices vary over a grid. We find that typically more than one equilibria exist. However, there are only two perfect equilibria. Moreover, as the size of the grid becomes small, both these equilibria converge to the limit-pricing outcome.

Suggested Citation

  • Prabal Roy Chowdhury, 2002. "Limit-pricing as Bertrand equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(4), pages 811-822.
    • Handle: RePEc:spr:joecth:v:19:y:2002:i:4:p:811-822
    Note: Received: February 25, 2000; revised version: January 9, 2001
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    Citations

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    Cited by:

    1. Sai Bravo & Carole Haritchabalet, 2021. "Certification of low-carbon hydrogen in the transport market," Working Papers hal-03371277, HAL.
    2. Marie-Laure Cabon-Dhersin & Nicolas Drouhin, 2020. "A general model of price competition with soft capacity constraints," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(1), pages 95-120, July.
    3. Germán Coloma, 2010. "El número óptimo de empresas bajo competencia de Bertrand," Estudios de Economia, University of Chile, Department of Economics, vol. 37(2 Year 20), pages 189-205, December.
    4. Saporiti Alejandro & Coloma Germán, 2010. "Bertrand Competition in Markets with Fixed Costs," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-30, June.
    5. Sai Bravo & Carole Haritchabalet, 2021. "Certification of low-carbon hydrogen in the transport market," Working papers of Transitions Energétiques et Environnementales (TREE) hal-03371277, HAL.
    6. Alejandro Saporiti & German Coloma, 2008. "Bertrand's price competition in markets with fixed costs," RCER Working Papers 541, University of Rochester - Center for Economic Research (RCER).
    7. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth equilibrium with a large number of firms," Discussion Papers 04-12, Indian Statistical Institute, Delhi.
    8. repec:ebl:ecbull:v:12:y:2008:i:29:p:1-8 is not listed on IDEAS
    9. Makoto Yano & Takashi Komatsubara, 2018. "Price competition or price leadership," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(4), pages 1023-1057, December.
    10. Marie-Laure Cabon-Dhersin & Nicolas Drouhin, 2021. "Chamberlin without differentiation: Soft-capacity constrained price competition with free entry," Working Papers halshs-03378500, HAL.
    11. Zhang, Zibin & Vedenov, Dmitry V. & Wetzstein, Michael E., 2007. "Can the U.S. Ethanol Industry Compete in the Alternative Fuels' Market?," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34867, Southern Agricultural Economics Association.
    12. Marie-Laure Cabon-Dhersin & Nicolas Drouhin, 2022. "Chamberlin without differentiation: Soft-capacity constrained price competition with free entry," Post-Print halshs-03378500, HAL.
    13. Massimo A. De Francesco, 2008. "Existence of pure strategy equilibrium in Bertrand-Edgeworth games with imperfect divisibility of money," Economics Bulletin, AccessEcon, vol. 12(29), pages 1-8.
    14. Germán Coloma & Alejandro Saporiti, 2006. "Bertrand equilibria in markets with fixed costs," Economics Discussion Paper Series 0627, Economics, The University of Manchester.

    More about this item

    Keywords

    Limit-pricing; Bertrand equilibrium; Increasing returns to scale; Perfect equilibrium.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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