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Winner-take-all price competition

Author

Listed:
  • John Morgan

    () (Woodrow Wilson School for Public and International Affairs and Department of Economics,Princeton University, Princeton, NJ 08544, USA)

  • Michael R. Baye

    () (Department of Business Economics and Public Policy, Kelley School of Business,Indiana University, 1309 East Tenth Street, Bloomington, IN 47405-1701, USA%)

Abstract

We analyze an oligopoly model of homogeneous product price competition that allows for discontinuities in demand and/or costs. Conditions under which only zero profit equilibrium outcomes obtain in such settings are provided. We then illustrate through a series of examples that the conditions provided are "tight" in the sense that their relaxation leads to positive profit outcomes.

Suggested Citation

  • John Morgan & Michael R. Baye, 2002. "Winner-take-all price competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(2), pages 271-282.
  • Handle: RePEc:spr:joecth:v:19:y:2002:i:2:p:271-282 Note: Received: April 7, 2000; revised version: September 14, 2000
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    References listed on IDEAS

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    1. Neary, J Peter, 2002. "Foreign Competition and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 680-693, November.
    2. Fridolfsson, Sven-Olof & Stennek, Johan, 2005. "Hold-up of anti-competitive mergers," International Journal of Industrial Organization, Elsevier, vol. 23(9-10), pages 753-775, December.
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    5. Kamal Saggi & Halis Murat Yildiz, 2006. "On the International Linkages between Trade and Merger Policies," Review of International Economics, Wiley Blackwell, vol. 14(2), pages 212-225, May.
    6. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2006. "National versus international mergers in unionized oligopoly," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 212-233, March.
    7. Nocke, Volker & Yeaple, Stephen, 2007. "Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity," Journal of International Economics, Elsevier, pages 336-365.
    8. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-1123, November.
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    Citations

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    Cited by:

    1. Hoernig, Steffen, 2005. "On the Community Patent," CEPR Discussion Papers 4883, C.E.P.R. Discussion Papers.
    2. Alejandro Saporiti & German Coloma, 2008. "Bertrand's price competition in markets with fixed costs," RCER Working Papers 541, University of Rochester - Center for Economic Research (RCER).
    3. Hoernig, Steffen, 2005. "Bertrand Equilibria and Sharing Rules," FEUNL Working Paper Series wp468, Universidade Nova de Lisboa, Faculdade de Economia.
    4. Oriol Carbonell-Nicolau, 2011. "The Existence of Perfect Equilibrium in Discontinuous Games," Games, MDPI, Open Access Journal, vol. 2(3), pages 1-22, July.
    5. Ganesh Iyer & Amit Pazgal, 2008. "Procurement bidding with restrictions," Quantitative Marketing and Economics (QME), Springer, vol. 6(2), pages 177-204, June.

    More about this item

    Keywords

    Price competition; Discontinuity; Bertrand; Hotelling.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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