Bertrand competition with non-rigid capacity constraints

Prabal Roy Chowdhury ()
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Prabal Roy Chowdhury: Indian Statistical Institute, New Delhi

Discussion Papers from Indian Statistical Institute, Delhi

Abstract: We examine a model of Bertrand competition with non-rigid capacity constraints, so that by incurring an additional per unit cost of capacity expansion, firms can produce beyond capacity. We find that there is an interval of prices such that a price can be sustained as a pure strategy Nash equilibrium if and only if it lies in this interval. We then examine the properties of this set as [a] the number of firms becomes large and [b] the capacity cost increases.

Keywords: Bertrand competition; capacity constraint (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2009-01
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Citations: View citations in EconPapers (17)

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