IDEAS home Printed from https://ideas.repec.org/p/cpl/wpaper/1607.html
   My bibliography  Save this paper

Price Competition with Decreasing Returns-to-Scale: A General Model of Bertrand-Edgeworth Duopoly

Author

Listed:
  • Blake Allison

    (Department of Economics, Emory University)

  • Jason Lepore

    (Department of Economics, California Polytechnic State University)

Abstract

We present a novel approach to analyzing models of price competition. By realizing price competition as a class of all-pay contests, we are able to generalize the models in which pricing behavior can be characterized, accommodating convex (possibly asymmetric) cost structures and general demand rationing schemes. Using this approach, we identify necessary and sufficient conditions for a pure strategy equilibrium and use them to demonstrate the fragility of deterministic outcomes in pricing games. Consequently, we characterize bounds on equilibrium pricing and profits of all mixed strategy equilibria and examine the effect of demand and supply shifts on those bounds. Our focus on bounds can be motivated by the potential for multiple non-payoff equivalent equilibria, as we identify two types of equilibrium strategies through a derivation of sufficient conditions for uniqueness of equilibrium.

Suggested Citation

  • Blake Allison & Jason Lepore, 2016. "Price Competition with Decreasing Returns-to-Scale: A General Model of Bertrand-Edgeworth Duopoly," Working Papers 1607, California Polytechnic State University, Department of Economics.
    • Handle: RePEc:cpl:wpaper:1607
    as

    Download full text from publisher

    File URL: https://www.cob.calpoly.edu/economics/wp-content/uploads/sites/27/2019/11/paper1607.pdf
    File Function: First version, 2016
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Allison, Blake A. & Bagh, Adib & Lepore, Jason J., 2022. "Invariant equilibria and classes of equivalent games," Games and Economic Behavior, Elsevier, vol. 132(C), pages 448-462.

    More about this item

    Keywords

    Price competition; Contest; Demand rationing; Convex costs; Capacity constraints;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpl:wpaper:1607. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Matthew Cole (email available below). General contact details of provider: https://edirc.repec.org/data/decplus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.