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Market transparency and Bertrand competition

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  • KNAUFF, Malgorzata

Abstract

We investigate the effects of market transparency on prices in the Bertrand duopoly model for both the cases of strategic complementarities and strategic substitutes. For the former class of games “conventional wisdom” concerning prices is confirmed, since they decrease. The consumers are always better off with higher transparency but changes in firm's profits are ambiguous. For the latter class of games, an increase in market transparency may lead to an increase in one of the prices, which implies ambiguity in consumers' utility and firms' profits.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006037.

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Date of creation: 00 Apr 2006
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Handle: RePEc:cor:louvco:2006037

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Related research

Keywords: Bertrand duopoly; market transparency;

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  1. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
  2. AMIR, Rabah & GRILO, Isabel, 2001. "On strategic complementarity conditions in Bertrand oligopoly," CORE Discussion Papers 2001049, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. AMIR, Rabah, 1994. "Cournot Oligopoly and the Theory of Supermodular Games," CORE Discussion Papers 1994013, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Schultz, Christian, 2004. "Market transparency and product differentiation," Economics Letters, Elsevier, vol. 83(2), pages 173-178, May.
  5. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
  6. H. Peter Møllgaard & Per Baltzer Overgaard, 2001. "Market Transparency and Competition Policy," CIE Discussion Papers 2001-03, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  7. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  8. Rabah Amir, 2005. "Supermodularity and Complementarity in Economics: An Elementary Survey," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 636-660, January.
  9. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, December.
  10. Boone, J. & Potters, J.J.M., 2006. "Transparency, prices and welfare with imperfect substitutes," Open Access publications from Tilburg University urn:nbn:nl:ui:12-194307, Tilburg University.
  11. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  12. Nilsson, Arvid, 1999. "Transparency and Competition," Working Paper Series in Economics and Finance 298, Stockholm School of Economics, revised 29 Nov 1999.
  13. Schultz, Christian, 2005. "Transparency on the consumer side and tacit collusion," European Economic Review, Elsevier, vol. 49(2), pages 279-297, February.
  14. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  15. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  16. Bester, Helmut & Petrakis, Emmanuel, 1995. "Price competition and advertising in oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1075-1088, June.
  17. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. MaÅ?gorzata Knauff
    by Metablog Obserwatora Finansowego in Obserwator Finansowy on 2009-12-10 11:59:58

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