Dynamic Bertrand Oligopoly

Dynamic Bertrand Oligopoly

We study continuous time Bertrand oligopolies in which a small number of firms producing similar goods compete with one another by setting prices. We first analyze a static version of this game in order to better understand the strategies played in the dynamic setting. Within the static game, we characterize the Nash equilibrium when there are N players with heterogeneous costs. In the dynamic ...

Collusion in Dynamic Bertrand Oligopoly with Correlated Private Signals and Communication

This paper studies collusion in repeated Bertrand oligopoly when stochastic demand levels for the product of each rm are their private information and are positively correlated. It derives general su cient conditions for e cient collusion through communication and a simple grim-trigger strategy. This analysis is then applied to a model where the demand signal has multiple random components whic...

Multiproduct Bertrand Oligopoly with Exogenous and Endogenous Consumer Heterogeneity∗

We develop a spatial model in which consumers receive firm-specific location shocks and firms endogenously determine both franchise/product locations and prices. Remarkably, firms fail to profit from endogenous product-specific heterogeneity alone: while ex-post consumer heterogeneity ensures positive gross profits, competition for market share results in socially-excessive product lines and ze...

Oligopoly in Homogenous Good Markets: Static Analysis. * At the heart of oligopoly theory is the Bertrand model of price competition

Unique Nash Equilibrium: p1 = p2 = c. Proof: If pi = c, then there is no price at which firm j can earn strictly positive profit so that pj = c is a best response. Thus, p1 = p2 = c is a NE. To show uniqueness, note that if c < pi < pj , then firm j earns zero profit and can do strictly better by unilaterally deviating and charging a price ∈ (c, pi). If c = pi < pj , then firm i earns zero prof...

Oligopoly: Static and Dynamic Analysis