Bertrand and the long run

Roberto Burguet and József Sákovics

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: We propose a new model of simultaneous price competition, based on firms offer 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)
Pages: 19
Date: 2014-08
New Economics Papers: this item is included in nep-com and nep-ind
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http://www.econ.ed.ac.uk/papers/id244_esedps.pdf

Related works:
Journal Article: Bertrand and the long run (2017)
Working Paper: Bertrand and the Long Run (2015)
Working Paper: Bertrand and the long run (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:244

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