The possibility of mixed-strategy equilibria with constant-returns-to-scale technology under Bertrand competition

Todd R. Kaplan, David Wettstein

Research output: Contribution to journalArticlepeer-review

32 Scopus citations

Abstract

Abstract. We analyze the Nash equilibria of a standard Bertrand model. We show that in addition to the marginal-cost pricing equilibrium there is a possibility for mixed-strategy equilibria yielding positive profit levels. We characterize these equilibria and find that having unbounded revenues is the necessary and sufficient condition for their existence. Hence, we demonstrate that under realistic assumptions the only equilibrium is marginal-cost pricing.

Original languageEnglish
Pages (from-to)65-71
Number of pages7
JournalSpanish Economic Review
Volume2
Issue number1
DOIs
StatePublished - 1 Apr 2000

Keywords

  • JEL classification: C72, L13
  • Key words:Bertrand, price competition

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