A New Approach to Modeling Bertrand Duopoly

Tonu Puu

Review of Behavioral Economics, 2017, vol. 4, issue 1, 51-67

Abstract: Bertrand oligopoly needs global demand functions which apply to close substitutes. This is a problem, because economic theory never supplied anything but local definitions for substitutes. Lancaster’s “new theory of demand†is therefore invoked to supply one. In its format one can also quantify closeness of substitutes and incorporate optimisation of design. The present study focuses the pure price dynamics for Bertrand oligopoly when the design of the competing products is given, though quantified through Lancaster’s approach. Resulting is some complex dynamics, including high periodicity and chaos.

Keywords: Bertrand oligopoly; Lancaster’s new demand; Product design; Complex dynamics (search for similar items in EconPapers)
JEL-codes: C63 D11 D21 L13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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