The B.E. Journal of Theoretical Economics
Editor-in-Chief: Schipper, Burkhard
Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan
2 Issues per year
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Asymmetric Bertrand-Edgeworth Oligopoly and Mergers
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.
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