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Strategic profit sharing between firms: the bertrand model

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  • Waddle, Roberts

Abstract

The present paper first considers two firms in a homogeneous market competing in a two-stage game. Using a particular strategy, it shows that firms may be able to set prices above the marginal costs and thus get positive profits. This remarkable result is robust to the number of firms and to cost asymmetries. Furthermore and more importantly, when firms' costs are different, firms obtain positive profits even though they set prices at the highest marginal cost.

Suggested Citation

  • Waddle, Roberts, 2005. "Strategic profit sharing between firms: the bertrand model," UC3M Working papers. Economics we050902, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we050902
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    Cited by:

    1. José Luis Ferreira & Roberts Waddle, 2010. "Strategic profit sharing between firms," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(4), pages 341-354, December.

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