On insufficient entry in Bayes-Bertrand oligopoly

Nandish Patel ()
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Nandish Patel: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: We study entry in a differentiated-product Bertrand industry in which firms are privately informed about their marginal costs. We show that policies that facilitate entry, such as per-unit subsidies to entrants increase expected output and total welfare. Under Bayes-Bertrand competition, firms condition their pricing decisions on the expected costs of their rivals rather than on realized costs. In this environment, facilitating entry for relatively inefficient types raises the expected output of inframarginal firms and incumbents, owing to the strategic complementarity of prices. When all firms simultaneously decide whether to enter, it is optimal to allow all potential entrants to participate.

Keywords: Bayes-Bertrand oligopoly; Differentiated products; Market entry; Welfare maximization (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2026-05
New Economics Papers: this item is included in nep-com and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2026-011

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