A Comparison of Two-Market Bertrand Duopoly and Two-Market Cournot Duopoly
AbstractIn a two-market Bertrand duopoly,each of two firms chooses one of two markets and a price in that market. All four choices are made simultaneously. In a two-market Cournot duopoly, the firms choose quantities rather than prices.It is well known that in the one-market case the threat of price undercutting means that Bertrand equilibrium prices and profits will be lower and quantities higher than Cournot equilibrium prices, profits and quantities.We find a quite different consequence of price undercutting in two-market duopoly. In the two-market case the threat of price undercutting means that Bertrand equilibria are in continuous mixed strategies, while every Cournot duopoly has an equilibrium in pure strategies, or in strategies that are pure in each market.
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Bibliographic InfoPaper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-14.
Length: 21 pages
Date of creation: Apr 2002
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Cournot; Bertrand; Two-Market Duopoly;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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