EconPapers    
Economics at your fingertips  
 

Multilateral limit pricing in price-setting games

Eray Cumbul () and Gábor Virág ()

Games and Economic Behavior, 2018, vol. 111, issue C, 250-273

Abstract: In this paper, we characterize the set of pure strategy undominated equilibria in differentiated Bertrand oligopolies with linear demand and constant unit costs when firms may prefer not to produce. When all firms are active, there is a unique equilibrium. However, there is a continuum of non-equivalent Bertrand equilibria on a wide range of parameter values when the number of firms (n) is more than two and n⁎∈[2,n−1] firms are active. In each such equilibrium, the firms that are relatively more cost or quality efficient limit their prices to induce the exit of their rival(s). When n≥3, this game does not need to satisfy supermodularity, the single-crossing property, or log-supermodularity. Moreover, the best responses might have negative slopes. Our main results extend to a Stackelberg entry game where some established incumbents first set their prices, and then a potential entrant sets its price.

Keywords: Bertrand; Supermodularity; Market entry and exit; Limit pricing; Stackelberg (search for similar items in EconPapers)
JEL-codes: L11 L13 C72 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825618301131
Full text for ScienceDirect subscribers only

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:eee:gamebe:v:111:y:2018:i:c:p:250-273

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-11-01
Handle: RePEc:eee:gamebe:v:111:y:2018:i:c:p:250-273