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On stability of Bertrand-Nash equilibrium in a simple model of the labour market

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Listed:
  • Massimo A. De Francesco

    (Department of Economics, University of Siena)

Abstract

We examine a Bertrand-Edgeworth model of competition in a labour market where the workers simultaneously set wages disregarding any influence their current decision may have on opponents' future decisions. The iterated best response process is shown to converge in finite time to a Bertrand-Nash solution, where wages are set at the market-clearing level. This convergence result is also shown to hold when the assumption of static expectations is replaced by milder restrictions on beliefs about opponents'' wages.

Suggested Citation

  • Massimo A. De Francesco, 2001. "On stability of Bertrand-Nash equilibrium in a simple model of the labour market," Economics Bulletin, AccessEcon, vol. 3(19), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-01c70015
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    References listed on IDEAS

    as
    1. Cheng-Zhong Qin & Burkhard Hehenkamp & Charles Stuart, 1999. "Economic natural selection in Bertrand and Cournot settings," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 211-224.
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    3. Vives, Xavier, 1986. "Rationing rules and Bertrand-Edgeworth equilibria in large markets," Economics Letters, Elsevier, vol. 21(2), pages 113-116.
    4. Cheng-Zhong Qin & Charles Stuart, 1997. "Bertrand versus Cournot revisited," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(3), pages 497-507.
    5. Franklin M. Fisher, 1961. "The Stability of the Cournot Oligopoly Solution: The Effects of Speeds of Adjustment and Increasing Marginal Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 28(2), pages 125-135.
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    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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