Free Entry Bertrand Competition

Roy Chowdhury, Prabal (2009): Free Entry Bertrand Competition.

Abstract

This paper examines Bertrand competition under free entry, when firm size vis-a-vis market size is exogenously given. A free entry Bertrand Nash equilibrium (FEBE) exists if and only if relative market size is sufficiently large. Further, there is a unique coalition-proof Nash equilibrium price that corresponds to the minimum FEBE price, leads to average cost pricing for all active firms and is decreasing in market size.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bertrand competition; free entry; coalition-proof; contestability
• Subjects: D - Microeconomics > D5 - General Equilibrium and Disequilibrium; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise

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