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Bertrand Price Competition in a Social Environment

Author

Listed:
  • Xander F. Tieman

    (Vrije Universiteit Amsterdam)

  • Gerard van der Laan

    (Vrije Universiteit Amsterdam)

  • Harold Houba

    (Vrije Universiteit Amsterdam)

Abstract

This discussion paper resulted in a publication in De Economist (2001). Volume 149, p. 33-51. In this paper the behavior of producers in a social environment is considered from a more sociological point of view than is usually done in economics. The producers play Bertrand price competition against each other and change the action they played based upon the outcome of the game, according to a metastrategy. This metastrategy is a sociological behavioral rule, based on thenotion of fairness or aspiration level. In this way an evolutionary process is specified.The main result is that the emergence of cooperative behavior can be explained by this evolutionary process which incorporates behavioral rules. The model also shows that occasionally price wars may occur.

Suggested Citation

  • Xander F. Tieman & Gerard van der Laan & Harold Houba, 1996. "Bertrand Price Competition in a Social Environment," Tinbergen Institute Discussion Papers 96-140/8, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:19960140
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    File URL: https://papers.tinbergen.nl/96140.pdf
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    Cited by:

    1. Gerard van der Laan & A.F. Tieman, 1996. "Evolutionary Game Theory and the Modelling of Economic Behavior," Tinbergen Institute Discussion Papers 96-172/8, Tinbergen Institute.

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