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Dynamics of a Bertrand duopoly with differentiated products and nonlinear costs: Analysis, comparisons and new evidences

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  • Brianzoni, Serena
  • Gori, Luca
  • Michetti, Elisabetta

Abstract

This paper studies mathematical properties and dynamics of a duopoly with price competition and horizontal product differentiation by introducing quadratic production costs (decreasing returns to scale), thus extending the model with linear costs (constant returns to scale) of Fanti et al. [11]. The economy is described by a two-dimensional non-invertible discrete time dynamic system. The paper first determines fixed points and other invariant sets, showing that synchronized dynamics can occur. Then, stability properties are compared in the cases of quadratic costs and linear costs by considering the degree of product differentiation and the speed of adjustment of prices as key parameters. It is also shown that synchronization takes place if products tend to be relatively complements and stressed similarities and differences between models with quadratic and linear costs. Finally, the paper focuses on the phenomenon of multistability thus underlying new evidences in comparison with the model with linear costs.

Suggested Citation

  • Brianzoni, Serena & Gori, Luca & Michetti, Elisabetta, 2015. "Dynamics of a Bertrand duopoly with differentiated products and nonlinear costs: Analysis, comparisons and new evidences," Chaos, Solitons & Fractals, Elsevier, vol. 79(C), pages 191-203.
  • Handle: RePEc:eee:chsofr:v:79:y:2015:i:c:p:191-203
    DOI: 10.1016/j.chaos.2015.05.014
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    References listed on IDEAS

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    1. Michael Kopel & Luca Lambertini, 2013. "On Price Competition with Market Share Delegation Contracts," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(1), pages 40-43, January.
    2. Ahmed, E. & Elsadany, A.A. & Puu, Tonu, 2015. "On Bertrand duopoly game with differentiated goods," Applied Mathematics and Computation, Elsevier, vol. 251(C), pages 169-179.
    3. Bischi, Gian-Italo & Stefanini, Luciano & Gardini, Laura, 1998. "Synchronization, intermittency and critical curves in a duopoly game," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 44(6), pages 559-585.
    4. Zhang, Jixiang & Da, Qingli & Wang, Yanhua, 2009. "The dynamics of Bertrand model with bounded rationality," Chaos, Solitons & Fractals, Elsevier, vol. 39(5), pages 2048-2055.
    5. Giant-italo Bischi & Laura Gardini, 2000. "Global properties of symmetric competition models with riddling and blowout phenomena," Discrete Dynamics in Nature and Society, Hindawi, vol. 5, pages 1-12, January.
    6. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    7. Bischi, Gian Italo & Naimzada, Ahmad K. & Sbragia, Lucia, 2007. "Oligopoly games with Local Monopolistic Approximation," Journal of Economic Behavior & Organization, Elsevier, vol. 62(3), pages 371-388, March.
    8. Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2012. "Nonlinear dynamics in a Cournot duopoly with relative profit delegation," Chaos, Solitons & Fractals, Elsevier, vol. 45(12), pages 1469-1478.
    9. Fanti, Luciano & Gori, Luca & Mammana, Cristiana & Michetti, Elisabetta, 2014. "Local and global dynamics in a duopoly with price competition and market share delegation," Chaos, Solitons & Fractals, Elsevier, vol. 69(C), pages 253-270.
    10. Fanti, Luciano & Gori, Luca & Mammana, Cristiana & Michetti, Elisabetta, 2013. "The dynamics of a Bertrand duopoly with differentiated products: Synchronization, intermittency and global dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 52(C), pages 73-86.
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    Cited by:

    1. Zhang, Xinli & Sun, Deshan & Ma, Sijia & Zhang, Shuning, 2020. "The dynamics of a quantum Bertrand duopoly with differentiated products and heterogeneous expectations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 557(C).

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