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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Cervellati, Matteo / Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier

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Asymmetric Bertrand-Edgeworth Oligopoly and Mergers

Daisuke Hirata1

1The University of Tokyo,

Citation Information: The B.E. Journal of Theoretical Economics. Volume 9, Issue 1, ISSN (Online) 1935-1704, DOI: 10.2202/1935-1704.1500, July 2009

Publication History

Published Online:

This paper investigates mixed strategy equilibria in a capacity-constrained price competition among three firms. It is shown that the equilibria in an asymmetric oligopoly are substantially different from those in a duopoly and symmetric oligopoly. In an asymmetric triopoly, it is possible that (i) a continuum of equilibria exists and that (ii) the lowest price of the smallest firm is higher than that of the others and the smallest firm earns more than the max-min profit in undominated strategies. In particular, the second finding sheds light on a new pricing incentive in Bertrand competitions. As an application, the equilibrium characterizations give rise to a new class of merger paradoxes.

Keywords: price competition; mixed strategy equilibrium; capacity constraint; homogeneous good; merger paradox

Citing Articles

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Massimo A. De Francesco
Bulletin of Economic Research, 2014, Volume 66, Number 4, Page 406
Blake A. Allison and Jason J. Lepore
Journal of Economic Theory, 2014, Volume 152, Page 291

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