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On insufficient entry in Bayes-Bertrand oligopoly

Author

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  • Nandish Patel

    (Indira Gandhi Institute of Development Research)

Abstract

We study entry in a differentiated-product Bertrand industry in which firms are privately informed about their marginal costs. We show that policies that facilitate entry, such as per-unit subsidies to entrants increase expected output and total welfare. Under Bayes-Bertrand competition, firms condition their pricing decisions on the expected costs of their rivals rather than on realized costs. In this environment, facilitating entry for relatively inefficient types raises the expected output of inframarginal firms and incumbents, owing to the strategic complementarity of prices. When all firms simultaneously decide whether to enter, it is optimal to allow all potential entrants to participate.

Suggested Citation

  • Nandish Patel, 2026. "On insufficient entry in Bayes-Bertrand oligopoly," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2026-011, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2026-011
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2026-011.pdf
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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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