Aggregation and Imperfect Competition: On the Existence of Equilibrium

Andrew Caplin and Barry Nalebuff

No 937, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products. The central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products. This includes products with multi-dimensional attributes. In addition to the proof of existence, we provide conditions for uniqueness. Our analysis covers location models, the characteristic approach, and probabilistic choice together in a unified framework. To prove existence, we employ aggregation theorems due to Prekopa (1971) and Borell (1975). Our companion paper [CFDP 938] introduces these theorems and develops the application to super-majority voting rules.

Keywords: Imperfect competition; Bertrand equilibrium; differentiated products; prices; price competition (search for similar items in EconPapers)
Pages: 37 pages
Date: 1990-02
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Citations: View citations in EconPapers (6)

Published in Econometrica (January 1991), 59(1): 25-59

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Journal Article: Aggregation and Imperfect Competition: On the Existence of Equilibrium (1991)
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