Strategic profit sharing between firms: the bertrand model

Roberts Waddle

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: The present paper first considers two firms in a homogeneous market competing in a two-stage game. Using a particular strategy, it shows that firms may be able to set prices above the marginal costs and thus get positive profits. This remarkable result is robust to the number of firms and to cost asymmetries. Furthermore and more importantly, when firms' costs are different, firms obtain positive profits even though they set prices at the highest marginal cost.

Date: 2005-02
New Economics Papers: this item is included in nep-acc and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we050902

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