Todd R. Kaplan () (Department of Economics, Ben-Gurion University of the Negev, P.O.B. 653, Beer-Sheva, Israel 84105) David Wettstein () (Department of Economics, Ben-Gurion University of the Negev, P.O.B. 653, Beer-Sheva, Israel 84105)
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We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assumptions the only equilibrium is marginal-cost pricing.
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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