The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Bertrand Competition

  • Michael R. Baye
  • Dan Kovenock
Reference work entry


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.


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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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Michael R. Baye
    • 1
  • Dan Kovenock
    • 1
  1. 1.