Strategic Profit Sharing Between Firms: The Bertrand Model
AbstractThe present paper first considers two firms in a homogeneous market competing in a two-stage game. Using a particular strategy, it shows that firms may be able to set prices above the marginal costs and thus get positive profits. This remarkable result is robust to the number of firms and to cost asymmetries. Furthermore and more importantly, when firms' costs are different, firms obtain positive profits even though they set prices at the highest marginal cost.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we050902.
Date of creation: Feb 2005
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ACC-2005-03-06 (Accounting & Auditing)
- NEP-ALL-2005-03-06 (All new papers)
- NEP-IND-2005-03-06 (Industrial Organization)
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