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Number of Sellers and Quantal Response Equilibrium Prices

Author

Listed:
  • Ralph-C. Bayer

    (School of Economics, University of Adelaide)

  • Hang Wu

    (School of Economics, University of Adelaide)

Abstract

This paper studies the effects of increasing the number of sellers on Quantal Response Equilibrium (QRE) prices in homogeneous product Bertrand oligopoly markets. We show that the two most commonly used choice functions (power and logistic) lead to qualitatively different comparative-static predictions with respect to the relationship between number of firms and prices.

Suggested Citation

  • Ralph-C. Bayer & Hang Wu, 2013. "Number of Sellers and Quantal Response Equilibrium Prices," School of Economics and Public Policy Working Papers 2013-15, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2013-15
    as

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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2013-15.pdf
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    References listed on IDEAS

    as
    1. C. Monica Capra & Jacob K Goeree & Rosario Gomez & Charles A Holt, 2002. "Learning and Noisy Equilibrium Behavior in an Experimental Study of Imperfect Price Competition," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 613-636, August.
    2. Martin Dufwenberg & Uri Gneezy & Jacob Goeree & Rosemarie Nagel, 2007. "Price floors and competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 211-224, October.
    3. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
    4. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    5. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-1061, October.
    6. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-1579, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bertrand Oligopoly; Quantal Response Equilibrium; Comparative Statics;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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