The end of the Bertrand Paradox?

Marie-Laure Cabon-Dhersin and Nicolas Drouhin ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: This paper analyzes price competition in the case of two firms operating under constant returns to scale with more than one production factor. Factors are chosen sequentially in a two-stage game implying a convex short term cost function in the second stage of the game. We show that the collusive outcome is the only predictable issue of the whole game i.e. the unique non Pareto-dominated pure strategy Nash Equilibrium. Technically, this paper bridges the capacity constraint literature on price competition with the one of convex cost function, solving the Bertrand Paradox in the line of Edgeworth's research program

Keywords: Price competition; collusion; convex cost; Bertrand Paradox; capacity constraint; constant returns-to-scale (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-09
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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http://mse.univ-paris1.fr/pub/mse/CES2010/10079.pdf (application/pdf)

Related works:
Working Paper: The end of the Bertrand Paradox? (2010)
Working Paper: The end of the Bertrand Paradox? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:10079

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