Oligopolistic price competition with a continuous demand

Pavlo Blavatskyy

Mathematical Social Sciences, 2018, vol. 93, issue C, 123-131

Abstract: Demand functions in two related models of oligopolistic price competition with homogeneous products are derived from a set of economically plausible axioms. These axioms represent weaker assumptions about consumer behavior compared to the classic Bertrand model. In both models, firms do not necessarily face a discontinuous demand at an equilibrium price level. Hence, firms may charge an equilibrium price that is above their marginal cost (earning a strictly positive profit). The equilibrium price is lower when there are more firms and/or consumers are more sensitive to price changes. In the limit, when consumers are highly sensitive to price changes, both models converge to the classic Bertrand model.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:93:y:2018:i:c:p:123-131

DOI: 10.1016/j.mathsocsci.2018.03.002

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