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Bertrand and Price-Taking Equilibria in Markets with Product Differentiation

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  • Germán Coloma

Abstract

In this paper we show that a homogeneous-product market with multiple Bertrand equilibria becomes a market with a single Bertrand equilibrium when we introduce a small degree of product differentiation. When differentiation tends to zero, that Bertrand equilibrium converges to the unique price-taking equilibrium of the homogeneous-product market, which is in turn one of the multiple Bertrand equilibria for that market.

Suggested Citation

  • Germán Coloma, 2008. "Bertrand and Price-Taking Equilibria in Markets with Product Differentiation," CEMA Working Papers: Serie Documentos de Trabajo. 369, Universidad del CEMA.
  • Handle: RePEc:cem:doctra:369
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    File URL: http://www.ucema.edu.ar/publicaciones/download/documentos/369.pdf
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    References listed on IDEAS

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    1. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
    2. Germán Coloma & Alejandro Saporiti, 2006. "Bertrand equilibria in markets with fixed costs," The School of Economics Discussion Paper Series 0627, Economics, The University of Manchester.
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    Cited by:

    1. Matthew Andrews & Milan Bradonjic & Iraj Saniee, 2017. "Quantifying the Benefits of Infrastructure Sharing," Papers 1706.05735, arXiv.org.

    More about this item

    Keywords

    Bertrand equilibrium; price-taking equilibrium; product differentiation;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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