Bertrand-Edgeworth game under oligopoly. General results and comparisons with duopoly

De Francesco, Massimo A. and Salvadori, Neri (2023): Bertrand-Edgeworth game under oligopoly. General results and comparisons with duopoly.

Abstract

This paper studies price competition among a given number of capacity-constrained producers of a homogeneous commodity under the efficient rationing rule and constant (and identical) marginal cost until full capacity, when demand is a continuous, non-increasing, and non-negative function defined on the set of non-negative prices and is positive, strictly decreasing, twice differentiable and (weakly) concave when positive. The focus is on general properties of equilibria in the region of the capacity space in which no pure strategy equilibria exist. We study how the properties that are known to hold for the duopoly are generalized to the oligopoly and, on the contrary, what properties do not need to hold in oligopoly. Our inquiry reveals, among other properties, the possibility of an atom in the support of a firm smaller than the largest one and the properties that such an atom entails. Although the characterization of equilibria is far from being complete, this paper provides substantial elements in this direction.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bertrand-Edgeworth; Price game; Oligopoly; Duopoly; Mixed strategy equilibrium.
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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