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The Bertrand Duopoly with Bounded-Rational Consumers and Explicity Modeled Demand. A Numerical Example

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  • Michał Ramsza

    (Szkoła Główna Handlowa w Warszawie)

Abstract

The model presented herein is a variant of the original Bertrand duopoly model. The only difference comes from the more detailed model of behavior of the population of consumer. It is assumed that there is a particular distribution of reservation prices within the population. It is also assumed that consumers use a bounded-rational procedure of choice between the products. The main results are twofold. Firstly, it is shown that it is possible that equilibrium prices are higher than the marginal costs. Secondly, it is shown that there maybe two equilibrium points.

Suggested Citation

  • Michał Ramsza, 2013. "The Bertrand Duopoly with Bounded-Rational Consumers and Explicity Modeled Demand. A Numerical Example," Collegium of Economic Analysis Annals, Warsaw School of Economics, Collegium of Economic Analysis, issue 32, pages 121-129.
    • Handle: RePEc:sgh:annals:i:32:y:2013:p:121-129
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    Keywords

    Bertrand duopoly; population games;

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