Profits in pure Bertrand oligopolies

Arbeitspapier

This paper demonstrates that the Bertrand paradox does not hold if cost functions are strictly convex. Instead, multiple equilibria exist which can be Pareto-ranked. The paper shows that the Pareto-dominant equilibrium may imply profus higher than in Cournot competition or may even sustain perfect cartelization. The potential scope for implicit collusion is discussed for the case that the Pareto-dominant noncooperative equilibrium does not support perfect cartelization. Due to multiple non-cooperative equilibria, the discussion involves finitely repeated Bertrand games as well. The paper discusses several strategies which may support implicit collusion. 1t develops the notion of punishment-proofness, and it demonstrates that strongly renegotiationproof equilibria exist for sujficiently high discount factors. Finally, extensions are discussed which cover Stackeiberg leadership, fixed and sunk costs and endogenous market structures.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Year: 1995 ; Kiel: Institut für Weltwirtschaft (IfW)

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets
• Subject: Bertrand competition ; Bertrand paradox ; implicit collusion ; renegotiationproofness ; punishment-proofness ; Oligopol ; Spieltheorie ; Wohlfahrtstheorie ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Stähler, Frank
• Event: Veröffentlichung
• (who): Kiel Institute of World Economics (IfW) ; ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel
• (when): 1995

Further information

• Handle: http://hdl.handle.net/10419/46903
• Last update: 10.03.2025, 11:42 AM CET