The possibility of mixed-strategy equilibria with constant-returns-to-scale technology under Bertrand competition
We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assumptions the only equilibrium is marginal-cost pricing.
Volume (Year): 2 (2000)
Issue (Month): 1 ()
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