Bertrand equilibrium in a differentiated duopoly
AbstractThis paper studies the stability of price competition in a horizontally differentiated duopoly. The firms' demand is derived from a distribution of consumer preferences. This description of the consumer sector is applicable to a large class of differentiated commodity markets, including spatial competition models. The author shows that there is a (pure) price-setting equilibrium when consumer tastes are sufficiently dispersed. Further conditions on the dispersedness of preferences guarantee uniqueness of the equilibrium. In addition, the author examines the relation between consumer preferences and the competitiveness and efficiency of the equilibrium outcome. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 209.
Date of creation: Nov 1988
Date of revision:
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Price competition; Product differentiation; Oligopoly theory;
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