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Bertrand-Edgeworth equilibrium with a large number of firms

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Author Info
Roy Chowdhury, Prabal

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Abstract

We examine a model of price competition with strictly convex costs where the firms simultaneously decide on both price and quantity, are free to supply less than the quantity demanded, and there is discrete pricing. If firms are symmetric then, for a large class of residual demand functions, there is a unique equilibrium in pure strategies whenever, for a fixed grid size, the number of firms is sufficiently large. Moreover, this equilibrium price is within a grid-unit of the competitive price. The results go through to a large extent when the firms are asymmetric, or they are symmetric but play a two stage game and the tie-breaking rule is `weakly manipulable'.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3353.

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Date of creation: Apr 2007
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Handle: RePEc:pra:mprapa:3353

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Related research
Keywords: Bertrand equilibrium; Edgeworth paradox; tie-breaking rule; rationing rule; folk theorem of perfect competition.;

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Find related papers by JEL classification:
D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Massimo A. De Francesco, 2008. "Existence of pure strategy equilibrium in Bertrand-Edgeworth games with imperfect divisibility of money," Economics Bulletin, Economics Bulletin, vol. 12(29), pages 1-8. [Downloadable!]
    Other versions:
  2. Hirata, Daisuke, 2008. "Bertrand-Edgeworth Equilibrium in Oligopoly," MPRA Paper 7946, University Library of Munich, Germany. [Downloadable!]
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