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Winner-take-all price competition

Author

Listed:
  • John Morgan

    (Woodrow Wilson School for Public and International Affairs and Department of Economics,Princeton University, Princeton, NJ 08544, USA)

  • Michael R. Baye

    (Department of Business Economics and Public Policy, Kelley School of Business,Indiana University, 1309 East Tenth Street, Bloomington, IN 47405-1701, USA%)

Abstract

We analyze an oligopoly model of homogeneous product price competition that allows for discontinuities in demand and/or costs. Conditions under which only zero profit equilibrium outcomes obtain in such settings are provided. We then illustrate through a series of examples that the conditions provided are "tight" in the sense that their relaxation leads to positive profit outcomes.

Suggested Citation

  • John Morgan & Michael R. Baye, 2002. "Winner-take-all price competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(2), pages 271-282.
    • Handle: RePEc:spr:joecth:v:19:y:2002:i:2:p:271-282
    Note: Received: April 7, 2000; revised version: September 14, 2000
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    Citations

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    Cited by:

    1. Ganesh Iyer & Amit Pazgal, 2008. "Procurement bidding with restrictions," Quantitative Marketing and Economics (QME), Springer, vol. 6(2), pages 177-204, June.
    2. Alejandro Saporiti & German Coloma, 2008. "Bertrand's price competition in markets with fixed costs," RCER Working Papers 541, University of Rochester - Center for Economic Research (RCER).
    3. Hoernig, Steffen, 2005. "Bertrand Equilibria and Sharing Rules," CEPR Discussion Papers 4972, C.E.P.R. Discussion Papers.
    4. Oriol Carbonell-Nicolau, 2011. "The Existence of Perfect Equilibrium in Discontinuous Games," Games, MDPI, vol. 2(3), pages 1-22, July.

    More about this item

    Keywords

    Price competition; Discontinuity; Bertrand; Hotelling.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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