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Nonuniform Bertrand Competition

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  • Mandy, David M

Abstract

The feasibility of Bertrand undercutting with nonuniform prices is established and properties are derived for Bertrand equilibrium in nonuniform price strategies. With free entry, equilibrium entails zero-profit minimum average cost production. If there is more than one producing firm, all prices collapse to a minimum average cost uniform price. An existence condition is compared to conditions from uniform price theory. Without free entry equilibrium, prices may not collapse to a uniform price. Positive profit may occur but all firms earn equal profit and incur equal marginal cost, while consumers pay average outlay no greater than marginal cost. Copyright 1992 by The Econometric Society.

Suggested Citation

  • Mandy, David M, 1992. "Nonuniform Bertrand Competition," Econometrica, Econometric Society, vol. 60(6), pages 1293-1330, November.
    • Handle: RePEc:ecm:emetrp:v:60:y:1992:i:6:p:1293-30
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    Cited by:

    1. Harrison, Mark & Kline, J. Jude, 2001. "Quantity competition with access fees," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 345-373, March.
    2. Felix Höffler, 2009. "Mobile termination and collusion, revisited," Journal of Regulatory Economics, Springer, vol. 35(3), pages 246-274, June.
    3. Esteban, Susanna & Miyagawa, Eiichi, 2006. "Temptation, self-control, and competitive nonlinear pricing," Economics Letters, Elsevier, vol. 90(3), pages 348-355, March.
    4. Arun Sundararajan, 2004. "Nonlinear Pricing of Information Goods," Management Science, INFORMS, vol. 50(12), pages 1660-1673, December.
    5. Farid Gasmi & Michel Moreaux & William Sharkey, 2000. "Strategic nonlinear pricing," Journal of Economics, Springer, vol. 71(2), pages 109-131, June.
    6. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth equilibrium: Manipulable residual demand," Discussion Papers 04-15, Indian Statistical Institute, Delhi.
    7. Marcel Canoy, 1994. "Natural monopoly and differential pricing," Journal of Economics, Springer, vol. 59(3), pages 287-309, October.
    8. Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth equilibrium with a large number of firms," Discussion Papers 04-12, Indian Statistical Institute, Delhi.
    9. Nicholas Economides & Steven S. Wildman, 1995. "Monopolistic Competition with Two-Part Tariffs," Working Papers 95-10, New York University, Leonard N. Stern School of Business, Department of Economics.
    10. Makoto Yano, 2006. "A price competition game under free entry," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 395-414, October.
    11. Griva, Krina & Vettas, Nikolaos, 2015. "On two-part tariff competition in a homogeneous product duopoly," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 30-41.
    12. Felix Hoeffler, 2006. "Mobile termination and collusion, revisited," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2006_16, Max Planck Institute for Research on Collective Goods.
    13. Arun Sundararajan, 2003. "Network Effects, Nonlinear Pricing and Entry Deterrence," Industrial Organization 0307002, University Library of Munich, Germany.
    14. Cheung, Francis K. & Wang, Xinghe, 1995. "Output, price, and welfare under nonlinear pricing in an imperfectly competitive industry," Journal of Economics and Business, Elsevier, vol. 47(4), pages 353-367, October.

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