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Bertrand-Edgeworth equilibrium with a large number of firms

  • Prabal Roy Chowdhury

    ()

    (Indian Statistical Institute, New Delhi)

We examine a model of price competition where the firms simultaneously decide on both price and quantity, and are free to supply less than the quantity demanded. We demonstrate that if the tie-breaking rule is `non-manipulable', then, for a large class of rationing rules, there is a unique equilibrium in pure strategies whenever the number of firms is large enough. We then show that the `folk theorem' of perfect competition holds. Finally, we examine if the results go through when the firms are asymmetric, or produce to order.

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Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 04-12.

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Length: 29 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:ind:isipdp:04-12
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