Abstract
This article presents the classic Bertrand model of oligopolistic price competition and shows how alternative assumptions on economic primitives – such as the structure of demand and cost functions, tie-breaking rules, and product differentiation – shape Nash equilibrium prices and profits. We also discuss the related Bertrand–Edgeworth model of price competition in which consumers may be rationed – either strategically or due to capacity constraints – and illustrate how alternative rationing rules influence equilibrium.
Keywords
- Bertrand competition
- Bertrand equilibrium
- Bertrand paradox
- Bertrand, J. L. F.
- Bertrand–Edgeworth competition
- best response (reply)
- capacity
- Cournot, A. A.
- duopoly
- Edgeworth cycles
- homogeneous products
- mixed-strategy equilibria
- monopoly
- Nash equilibrium
- oligopoly
- price competition
- product differentiation
- pure-strategy equilibria
- rationing rules
- residual monopoly price
- strategic complements
- supermodularity
- winner-take-all
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Baye, M.R., Kovenock, D. (2018). Bertrand Competition. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2462
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2462
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