Bertrand Competition When Rivals' Costs Are Unknown

Daniel Spulber

Journal of Industrial Economics, 1995, vol. 43, issue 1, 1-11

Abstract: The conclusions of the Bertrand model of competition are substantially altered by the presence of asymmetric information about rivals' costs. Asymmetric information eliminates the discontinuity in the Bertrand model and significantly alters the properties of the market equilibrium. In the Bertrand-Nash equilibrium when rivals' costs are unknown, firms price above marginal cost and have positive expected profit. The analysis is extended to franchise competition. The market equilibrium is sensitive to market structure and yields incentives for entry. Copyright 1995 by Blackwell Publishing Ltd.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (108)

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1821%2819950 ... 0.CO%3B2-J&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jindec:v:43:y:1995:i:1:p:1-11

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0022-1821

Access Statistics for this article

Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

More articles in Journal of Industrial Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().