Correlated equilibria in homogenous good Bertrand competition

Ole Jann; Christoph Schottmüller

doi:10.1016/j.jmateco.2015.01.005

Correlated equilibria in homogenous good Bertrand competition

Ole Jann, Christoph Schottmüller

2 Citationer (Scopus)

Abstract

We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogeneous goods and identical marginal costs. This provides a theoretical underpinning for the so-called "Bertrand paradox" as well as its most general formulation to date. Our proof generalizes to asymmetric marginal costs and arbitrarily many players in the following way: The market price cannot be higher than the second lowest marginal cost in any correlated equilibrium.

Originalsprog	Engelsk
Tidsskrift	Journal of Mathematical Economics
Vol/bind	57
Sider (fra-til)	31-37
ISSN	0304-4068
DOI	https://doi.org/10.1016/j.jmateco.2015.01.005
Status	Udgivet - 1 mar. 2015

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title = "Correlated equilibria in homogenous good Bertrand competition",

abstract = "We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogeneous goods and identical marginal costs. This provides a theoretical underpinning for the so-called {"}Bertrand paradox{"} as well as its most general formulation to date. Our proof generalizes to asymmetric marginal costs and arbitrarily many players in the following way: The market price cannot be higher than the second lowest marginal cost in any correlated equilibrium.",

keywords = "Faculty of Social Sciences, Bertrand paradox, correlated equilibrium, price competition",

author = "Ole Jann and Christoph Schottm{\"u}ller",

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TY - JOUR

T1 - Correlated equilibria in homogenous good Bertrand competition

AU - Jann, Ole

AU - Schottmüller, Christoph

PY - 2015/3/1

Y1 - 2015/3/1

N2 - We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogeneous goods and identical marginal costs. This provides a theoretical underpinning for the so-called "Bertrand paradox" as well as its most general formulation to date. Our proof generalizes to asymmetric marginal costs and arbitrarily many players in the following way: The market price cannot be higher than the second lowest marginal cost in any correlated equilibrium.

AB - We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogeneous goods and identical marginal costs. This provides a theoretical underpinning for the so-called "Bertrand paradox" as well as its most general formulation to date. Our proof generalizes to asymmetric marginal costs and arbitrarily many players in the following way: The market price cannot be higher than the second lowest marginal cost in any correlated equilibrium.

KW - Faculty of Social Sciences

KW - Bertrand paradox

KW - correlated equilibrium

KW - price competition

U2 - 10.1016/j.jmateco.2015.01.005

DO - 10.1016/j.jmateco.2015.01.005

M3 - Journal article

SN - 0304-4068

VL - 57

SP - 31

EP - 37

JO - Journal of Mathematical Economics

JF - Journal of Mathematical Economics

ER -

Correlated equilibria in homogenous good Bertrand competition

Abstract

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