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Bertrand Competition in Markets with Fixed Costs.
- Source :
- B.E. Journal of Theoretical Economics: Contributions to Theoretical Economics; 2010, Vol. 10 Issue 1, preceding p1-28, 30p, 1 Chart, 2 Graphs
- Publication Year :
- 2010
-
Abstract
- This paper provides necessary and sufficient conditions for the existence of a pure strategy Bertrand equilibrium in a model of price competition with fixed costs. It unveils an interesting and unexplored relationship between Bertrand competition and natural monopoly. That relationship points out that the non-subadditivity of the cost function at the output level corresponding to the oligopoly break-even price, denoted by D(pL(n)), is sufficient to guarantee that the market sustains a (not necessarily symmetric) Bertrand equilibrium in pure strategies with two or more firms supplying at least D(pL(n)). Conversely, the existence of a pure strategy equilibrium ensures that the cost function is not subadditive at every output greater than or equal to D(pL(n)). [ABSTRACT FROM AUTHOR]
- Subjects :
- ECONOMIC competition
OVERHEAD costs
MONOPOLIES
ECONOMIC equilibrium
NASH equilibrium
Subjects
Details
- Language :
- English
- ISSN :
- 15345971
- Volume :
- 10
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- B.E. Journal of Theoretical Economics: Contributions to Theoretical Economics
- Publication Type :
- Academic Journal
- Accession number :
- 57816712
- Full Text :
- https://doi.org/10.2202/1935-1704.1634