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Bertrand Equilibrium in a Differentiated Duopoly

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  • Bester, Helmut

Abstract

This paper studies the stability of price competition in a horizontally differentiated duopoly. The firms' demand is derived from a distribution of consumer preferences. This description of the consumer sector is applicable to a large class of differentiated commodity markets, including spatial competition models. The author shows that there is a (pure) price-setting equilibrium when consumer tastes are sufficiently dispersed. Further conditions on the dispersedness of preferences guarantee uniqueness of the equilibrium. In addition, the author examines the relation between consumer preferences and the competitiveness and efficiency of the equilibrium outcome. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Bester, Helmut, 1992. "Bertrand Equilibrium in a Differentiated Duopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 433-448, May.
    • Handle: RePEc:ier:iecrev:v:33:y:1992:i:2:p:433-48
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    1. Raa, Thijs ten & Wolff, Edward N., 1991. "Secondary products and the measurement of productivity growth," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 581-615, December.
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    3. van der Ploeg, F., 1991. "Money and capital in interdependent economies with overlapping generations," Other publications TiSEM 46f03cc8-b46a-47b4-8656-5, Tilburg University, School of Economics and Management.
    4. Mas-Colell, Andreu, 1975. "A model of equilibrium with differentiated commodities," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 263-295.
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