Integer Pricing and Bertrand-Edgeworth Oligopoly with Strictly Convex Costs: Is It Worth More Than a Penny?

In this paper we analyze the implications of integer pricing for Bertrand Edgeworth oligopoly with strictly convex costs. When price is a continuous variable, there is a generic non-existence of pure-strategy equilibrium. In the case of integer pricing, this is not so. We characterize a set of possible single price equilibria around the competitive price, which if non-empty will constitute the set of single price equilibria if the industry is large enough. Furthermore, we provide an example in which the highest equilibrium price can be arbitrarily far from the competitive price. Copyright 1993 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research