A Two‐stage Price‐setting Duopoly: Bertrand or Stackelberg

Toshihiro Matsumura

Australian Economic Papers, 1998, vol. 37, issue 2, 103-118

Abstract: This paper investigates a two‐stage price‐setting duopoly with differentiated goods. First, each firm announces its price; second, it chooses its actual price; and finally the market opens. Once a firm announces a price, it is able to discount it but not raise it. The model includes Stackelberg‐type and Bertrand‐type equilibria as possible outcomes. Whether Bertrand or Stackelberg appears in equilibrium depends on the properties of demand functions crucially. We find three patterns of equilibrium outcomes; one case has Bertrand equilibrium only, another has Stackelberg only, and the other has both equilibria

Date: 1998
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