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Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes

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  • Prabal Roy Chowdhury

    (Indian Statistical Institute, New Delhi)

Abstract

Consider a Bertrand-Edgeworth duopoly with linear cost functions. If the firms produce to stock then no Nash equilibrium in pure strategies exists. If, however, the firms produce to order then all subgame perfect Nash equilibria involve the firms charging a price equal to marginal cost.

Suggested Citation

  • Prabal Roy Chowdhury, 2004. "Bertrand-Edgeworth duopoly with linear costs: A tale of two paradoxes," Discussion Papers 04-13, Indian Statistical Institute, Delhi.
    • Handle: RePEc:alo:isipdp:04-13
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    File URL: http://www.isid.ac.in/~pu/dispapers/dp04-13.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Bertrand paradox; Edgeworth paradox; linear cost;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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