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Bertrand Competition Can Yield Higher Prices Than Monopoly

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  • Helge Sanner

Abstract

If we take into account the spatial dimension of markets, prices of incumbent firms may be higher and consumer surplus may be lower with competition than with monopoly. This result obtains unambiguously, even in the supposedly highly competitive case of Bertrand competition. Moreover, we are able to show that consumers of the commodity may be worse off with duopoly, if the distance between the firms' sites is sufficiently large.

Suggested Citation

  • Helge Sanner, 2007. "Bertrand Competition Can Yield Higher Prices Than Monopoly," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 247-254, July.
    • Handle: RePEc:bla:buecrs:v:59:y:2007:i:3:p:247-254
    DOI: 10.1111/j.0307-3378.2007.00259.x
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    References listed on IDEAS

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    1. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
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    Cited by:

    1. Pennerstorfer, Dieter & Weiss, Christoph, 2013. "Spatial clustering and market power: Evidence from the retail gasoline market," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 661-675.
    2. Clark, Derek J. & Jørgensen, Finn & Mathisen, Terje Andreas, 2011. "Relationships between fares, trip length and market competition," Transportation Research Part A: Policy and Practice, Elsevier, vol. 45(7), pages 611-624, August.

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