Bertrand versus Cournot with Convex Variable Costs

Flavio Delbono and Luca Lambertini ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: Within a simple model of homogeneous oligopoly, we show that the traditional ranking between Bertrand and Cournot equilibria may be reversed. For price setting entails a continuum of price equilibria under convex variable costs, departure from marginal cost pricing may be observed. As a consequence, Bertrand-Nash equilibrium profi?ts (welfare) may be higher (lower) than Cournot-Nash ones. The reversal of the standard rankings occurs when pricing strategies mimic collusive behaviour.

JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-com, nep-ind, nep-mfd and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp994

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