Bertrand Competition under Uncertainty
AbstractConsider a Bertrand model in which each firm may be inactive with aknown probability, so the number of active firms is uncertain. Thissimple model has a mixed-strategy equilibrium in which industryprofits are positive and decline with the number of firms, the samefeatures which make the Cournot model attractive. Unlike in a Cournotmodel with similar incomplete information, Bertrand profits alwaysncrease in the probability other firms are inactive. Profits declinemore sharply than in the Cournot model, and the pattern is similar tothat found by Bresnahan & Reiss (1991).
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 98-083/1.
Date of creation: 18 Aug 1998
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Other versions of this item:
- Eric Rasmusen, 1996. "Bertrand Competition Under Uncertainty," Industrial Organization 9607002, EconWPA.
- Maarten Janssen & Eric Rasmusen, 2000. "Bertrand Competition Under Uncertainty," Econometric Society World Congress 2000 Contributed Papers 1309, Econometric Society.
- Maarten Janssen & Eric Rasmusen, 2001. "Bertrand Competition Under Uncertainty," CIRJE F-Series CIRJE-F-117, CIRJE, Faculty of Economics, University of Tokyo.
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