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Free Entry Bertrand Competition

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  • Roy Chowdhury, Prabal

Abstract

This paper examines Bertrand competition under free entry, when firm size vis-a-vis market size is exogenously given. A free entry Bertrand Nash equilibrium (FEBE) exists if and only if relative market size is sufficiently large. Further, there is a unique coalition-proof Nash equilibrium price that corresponds to the minimum FEBE price, leads to average cost pricing for all active firms and is decreasing in market size.

Suggested Citation

  • Roy Chowdhury, Prabal, 2009. "Free Entry Bertrand Competition," MPRA Paper 17837, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17837
    as

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    File URL: https://mpra.ub.uni-muenchen.de/17837/1/MPRA_paper_17837.pdf
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    References listed on IDEAS

    as
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    5. Novshek, William & Chowdhury, Prabal Roy, 2003. "Bertrand equilibria with entry: limit results," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 795-808, June.
    6. Prabal Chowdhury & Kunal Sengupta, 2004. "Coalition-proof Bertrand equilibria," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 307-324, August.
    7. Chaudhuri, Prabal Ray, 1996. "The contestable outcome as a Bertrand equilibrium," Economics Letters, Elsevier, vol. 50(2), pages 237-242, February.
    8. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bertrand competition; free entry; coalition-proof; contestability;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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