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A Comparison of Two-Market Bertrand Duopoly and Two-Market Cournot Duopoly

  • Vicki Knoblauch

    (University of Connecticut)

In a two-market Bertrand duopoly,each of two firms chooses one of two markets and a price in that market. All four choices are made simultaneously. In a two-market Cournot duopoly, the firms choose quantities rather than prices.It is well known that in the one-market case the threat of price undercutting means that Bertrand equilibrium prices and profits will be lower and quantities higher than Cournot equilibrium prices, profits and quantities.We find a quite different consequence of price undercutting in two-market duopoly. In the two-market case the threat of price undercutting means that Bertrand equilibria are in continuous mixed strategies, while every Cournot duopoly has an equilibrium in pure strategies, or in strategies that are pure in each market.

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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2002-14.

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Length: 21 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:uct:uconnp:2002-14
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  1. Elberfeld, Walter & Wolfstetter, Elmar, 1999. "A dynamic model of Bertrand competition with entry," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 513-525, May.
  2. Beth Allen & Raymond Deneckere & Tom Faith & Dan Kovenock, 1994. "Capacity Precommitment as a Barrier to Entry:A Bertrand-Edgeworth Approach," Industrial Organization 9411002, EconWPA, revised 14 Nov 1994.
  3. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP -385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Dasgupta, Partha & Maskin, Eric, 1986. "The Existence of Equilibrium in Discontinuous Economic Games, I: Theory," Review of Economic Studies, Wiley Blackwell, vol. 53(1), pages 1-26, January.
  5. Hamilton, Jonathan H. & Thisse, Jacques-Francois & Weskamp, Anita, 1989. "Spatial discrimination : Bertrand vs. Cournot in a model of location choice," Regional Science and Urban Economics, Elsevier, vol. 19(1), pages 87-102, February.
  6. Maarten Janssen & Eric Rasmusen, 2000. "Bertrand Competition Under Uncertainty," Econometric Society World Congress 2000 Contributed Papers 1309, Econometric Society.
  7. Gersbach, Hans & Schmutzler, Armin, 1999. "External spillovers, internal spillovers and the geography of production and innovation," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 679-696, November.
  8. Simon, Leo K, 1987. "Games with Discontinuous Payoffs," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 569-97, October.
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