Bertrand competition with non-rigid capacity constraints
AbstractWe examine a model of Bertrand competition with non-rigid capacity constraints, so that by incurring an additional per unit cost of capacity expansion, firms can produce beyond capacity. We find that there is an interval of prices such that a price can be sustained as a pure strategy Nash equilibrium if and only if it lies in this interval. We then examine the properties of this set as [a] the number of firms becomes large and [b] the capacity cost increases.
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Bibliographic InfoPaper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 09-02.
Length: 13 pages
Date of creation: Jan 2009
Date of revision:
Bertrand competition; capacity constraint;
Other versions of this item:
- Roy Chowdhury, Prabal, 2009. "Bertrand competition with non-rigid capacity constraints," Economics Letters, Elsevier, vol. 103(1), pages 55-58, April.
- Prabal, Roy Chowdhury, 2008. "Bertrand Competition with Non-rigid Capacity Constraints," MPRA Paper 9172, University Library of Munich, Germany.
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-20 (All new papers)
- NEP-BEC-2010-02-20 (Business Economics)
- NEP-COM-2010-02-20 (Industrial Competition)
- NEP-IND-2010-02-20 (Industrial Organization)
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