A shared-revenue Bertrand game

Raj Pabari, Udaya Ghai, Dominique Perrault-Joncas, Kari Torkkola, Orit Ronen, Dhruv Madeka, Dean Foster and Omer Gottesman

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Abstract: We introduce and analyze a variation of the Bertrand game in which the revenue is shared between two players. This game models situations in which one economic agent can provide goods/services to consumers either directly or through an independent seller/contractor in return for a share of the revenue. We analyze the equilibria of this game, and show how they can predict different business outcomes as a function of the players' costs and the transferred revenue shares. Importantly, we identify game parameters for which independent sellers can simultaneously increase the original player's payoff while increasing consumer surplus. We then extend the shared-revenue Bertrand game by considering the shared revenue proportion as an action and giving the independent seller an outside option to sell elsewhere. This work constitutes a first step towards a general theory for how partnership and sharing of resources between economic agents can lead to more efficient markets and improve the outcomes of both agents as well as consumers.

Date: 2025-02
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind and nep-mic
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