Bertrand and the Long Run

József Sákovics and Roberto Burguet
Authors registered in the RePEc Author Service: József Sákovics

No 777, Working Papers from Barcelona School of Economics

Abstract: We propose a new model of simultaneous price competition, based on firms offering personalized prices to consumers. In a market for a homogeneous good and decreasing returns, the unique equilibrium leads to a uniform price equal to the marginal cost of each firm, at their share of the market clearing quantity. Using this result for the short-run competition, we then investigate the long-run investment decisions of the firms. While there is underinvestment, the overall outcome is more competitive than the Cournot model competition. Moreover, as the number of firms grows we approach the competitive long-run outcome.

Keywords: price competition; personalized prices; marginal cost pricing (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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Related works:
Journal Article: Bertrand and the long run (2017)
Working Paper: Bertrand and the long run (2014)
Working Paper: Bertrand and the long run (2014)
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