The classical price competition model (named after Bertrand) prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the "Bertrand Paradox". Many theoretical problems with the original model have been considered as an explanation of the paradox in the literature.
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Paper provided by Uppsala - Working Paper Series in its series Papers with number
1998-08.
Length: 19 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:uppaal:1998-08
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Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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