A Dynamic Model of Bertrand Competition with Entry
AbstractThis paper analyzes a simple, repeated game of simultaneous entry and pricing. We report a surprising property of the symmetric equilibrium solution: If the number of potential competitors is increased above two, the market breaks down with higher probability, and the competitive outcome becomes less likely. More potential competition lowers welfare - another Bertrand paradox. The model can also be applied to auctions to explore whether a revenue maximizing auctioneer should restrict the number of bidders if bidder participation is costly.
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Bibliographic InfoPaper provided by EconWPA in its series Microeconomics with number 9701003.
Date of creation: 24 Jan 1997
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Other versions of this item:
- Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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