Comparing Cournot and Bertrand equilibria revisited

Jim Jin ()

No FS IV 97-4, Discussion Papers, Research Unit: Market Dynamics from WZB Berlin Social Science Center

Abstract: This paper compares Cournot and Bertrand equilibria with mixed products, linear demand and cost functions. It is found that a firm's price (output) need not be higher (lower) in Cournot equilibrium. However, given any number of firms and a mixture of complement and substitute products, every firm's price margin/output ratio is always higher in Cournot equilibrium, and the weighted squared outputs (price margins) are higher (lower) in Bertrand equilibrium. When price (quantity) competition is a supermodular game, consumer surplus (social welfare) is higher in price competition. Nevertheless, price competition results in more market concentration measured by Herfindahl index.

Date: 1997
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