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Asymmetric Bertrand-Edgeworth Oligopoly and Mergers

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  • Hirata Daisuke

    () (The University of Tokyo)

Abstract

This paper investigates mixed strategy equilibria in a capacity-constrained price competition among three firms. It is shown that the equilibria in an asymmetric oligopoly are substantially different from those in a duopoly and symmetric oligopoly. In an asymmetric triopoly, it is possible that (i) a continuum of equilibria exists and that (ii) the lowest price of the smallest firm is higher than that of the others and the smallest firm earns more than the max-min profit in undominated strategies. In particular, the second finding sheds light on a new pricing incentive in Bertrand competitions. As an application, the equilibrium characterizations give rise to a new class of merger paradoxes.

Suggested Citation

  • Hirata Daisuke, 2009. "Asymmetric Bertrand-Edgeworth Oligopoly and Mergers," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-25, July.
  • Handle: RePEc:bpj:bejtec:v:9:y:2009:i:1:n:22
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    References listed on IDEAS

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    1. Hirata, Daisuke, 2008. "Bertrand-Edgeworth Equilibrium in Oligopoly," MPRA Paper 7946, University Library of Munich, Germany.
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    Cited by:

    1. Tamás Balogh & Attila Tasnádi, 2012. "Does timing of decisions in a mixed duopoly matter?," Journal of Economics, Springer, pages 233-249.
    2. Massimo A. De Francesco & Neri Salvadori, 2013. "Bertrand-Edgeworth Competition in an Almost Symmetric Oligopoly," Studies in Microeconomics, , vol. 1(2), pages 213-219, December.
    3. Zoltán Rácz & Attila Tasnádi, 2016. "A Bertrand–Edgeworth oligopoly with a public firm," Journal of Economics, Springer, pages 253-266.
    4. Massimo A. De Francesco, 2009. "A dynamic entry and price game with capacity indivisibility," Department of Economics University of Siena 577, Department of Economics, University of Siena.
    5. Victor Martínez-de-Albéniz & Kalyan Talluri, 2011. "Dynamic Price Competition with Fixed Capacities," Management Science, INFORMS, pages 1078-1093.
    6. Zhiqi Chen & Gang Li, 2014. "Horizontal Mergers in the Presence of Capacity Constraints," Carleton Economic Papers 14-11, Carleton University, Department of Economics.
    7. Zoltán Rácz & Attila Tasnádi, 2016. "A Bertrand–Edgeworth oligopoly with a public firm," Journal of Economics, Springer, pages 253-266.
    8. Attila Tasnádi, 2016. "Endogenous timing of moves in Bertrand–Edgeworth triopolies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 12(4), pages 317-334, December.
    9. Allison, Blake A. & Lepore, Jason J., 2014. "Verifying payoff security in the mixed extension of discontinuous games," Journal of Economic Theory, Elsevier, vol. 152(C), pages 291-303.
    10. Jacobs, Martin & Requate, Till, 2016. "Demand rationing in Bertrand-Edgeworth markets with fixed capacities: An experiment," Economics Working Papers 2016-03, Christian-Albrechts-University of Kiel, Department of Economics.
    11. Fitzenberger, Bernd & Furdas, Marina & Sajons, Christoph, 2016. "End-of-year spending and the long-run employment effects of training programs for the unemployed," Freiburg Discussion Papers on Constitutional Economics 16/08, Walter Eucken Institut e.V..
    12. De Francesco, Massimo A. & Salvadori, Neri, 2016. "Bertrand-Edgeworth games under triopoly: the equilibrium strategies when the payoffs of the two smallest firms are proportional to their capacities," MPRA Paper 69999, University Library of Munich, Germany.
    13. De Francesco, Massimo A. & Salvadori, Neri, 2015. "Bertrand-Edgeworth games under triopoly: the payoffs," MPRA Paper 64638, University Library of Munich, Germany.
    14. Jacobs, Martin & Requate, Till, 2016. "Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence," Economics Working Papers 2016-01, Christian-Albrechts-University of Kiel, Department of Economics.

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