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Existence of pure strategy equilibrium in Bertrand-Edgeworth games with imperfect divisibility of money

  • Massimo A. De Francesco

    ()

    (Department of Economics, University of Siena)

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    This paper incorporates imperfect divisibility of money in a price game where a given number of identical firms produce a homogeneous product at constant unit cost up to capacity. We find necessary and sufficient conditions for the existence of a pure strategy equilibrium. Unlike in the continuous action space case, with discrete pricing there may be a range of symmetric pure strategy equilibria - which we fully characterize - a range which may or may not include the competitive price. Also, we determine the maximum number of such equilibria when competitive pricing is itself an equilibrium.

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    File URL: http://www.accessecon.com/pubs/EB/2008/Volume12/EB-08L10034A.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 12 (2008)
    Issue (Month): 29 ()
    Pages: 1-8

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    Handle: RePEc:ebl:ecbull:eb-08l10034
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    1. Dastidar, Krishnendu Ghosh, 1995. "On the Existence of Pure Strategy Bertrand Equilibrium," Economic Theory, Springer, vol. 5(1), pages 19-32, January.
    2. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth equilibrium with a large number of firms," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-12, Indian Statistical Institute, New Delhi, India.
    3. Chaudhuri, Prabal Ray, 1996. "The contestable outcome as a Bertrand equilibrium," Economics Letters, Elsevier, vol. 50(2), pages 237-242, February.
    4. Dixon, Huw David, 1993. "Integer Pricing and Bertrand-Edgeworth Oligopoly with Strictly Convex Costs: Is It Worth More Than a Penny?," Bulletin of Economic Research, Wiley Blackwell, vol. 45(3), pages 257-68, July.
    5. Prabal Roy Chowdhury, 2002. "Limit-pricing as Bertrand equilibrium," Economic Theory, Springer, vol. 19(4), pages 811-822.
    6. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
    7. Vives, Xavier, 1986. "Rationing rules and Bertrand-Edgeworth equilibria in large markets," Economics Letters, Elsevier, vol. 21(2), pages 113-116.
    8. Harrington, Joseph Jr., 1989. "A re-evaluation of perfect competition as the solution to the Bertrand price game," Mathematical Social Sciences, Elsevier, vol. 17(3), pages 315-328, June.
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