The possibility of mixed-strategy equilibria with constant-returns-to-scale technology under Bertrand competition

We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assumptions the only equilibrium is marginal-cost pricing.

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Year of publication:	2000-04-25
Authors:	Kaplan, Todd R. ; Wettstein, David
Published in:	Spanish Economic Review. - Asociación Española de Economía - AEE. - Vol. 2.2000, 1, p. 65-71
Publisher:	Asociación Española de Economía - AEE
Subject:	Bertrand \| price competition

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Extent:	application/pdf
Type of publication:	Article
Classification:	C72 - Noncooperative Games ; L13 - Oligopoly and Other Imperfect Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005371336