Correlated equilibria in homogeneous good Bertrand competition

Ole Jann and Christoph Schottmüller

Journal of Mathematical Economics, 2015, vol. 57, issue C, 31-37

Abstract: We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogeneous goods and identical marginal costs. This provides a theoretical underpinning for the so-called “Bertrand paradox” as well as its most general formulation to date. Our proof generalizes to asymmetric marginal costs and arbitrarily many players in the following way: The market price cannot be higher than the second lowest marginal cost in any correlated equilibrium.

Keywords: Bertrand paradox; Correlated equilibrium; Price competition (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Working Paper: Correlated equilibria in homogenous good Bertrand competition (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:57:y:2015:i:c:p:31-37

DOI: 10.1016/j.jmateco.2015.01.005

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