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The impact of the number of sellers on quantal response equilibrium predictions in Bertrand oligopolies

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  • Ralph‐C Bayer
  • Chaohua Dong
  • Hang Wu

Abstract

This paper studies how increasing the number of sellers in a Bertrand oligopoly with homogenous goods affects the equilibrium price level predicted by logistic quantal response equilibrium (LQRE) and power‐function QRE (PQRE). We show that increasing the number of sellers reduces the average posted price in a PQRE, but can increase the average posted price in an LQRE. Our results indicate that the comparative‐static predictions of QRE (McKelvey & Palfrey, 1995, Games Econ Behav, 10, 6–38) are not necessarily robust to changes of the quantal response function.

Suggested Citation

  • Ralph‐C Bayer & Chaohua Dong & Hang Wu, 2019. "The impact of the number of sellers on quantal response equilibrium predictions in Bertrand oligopolies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(4), pages 787-793, November.
    • Handle: RePEc:bla:jemstr:v:28:y:2019:i:4:p:787-793
    DOI: 10.1111/jems.12298
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