The Bertrand paradox holds that price competition among at least two firms eliminates all profits in equilibrium, when firms have identical constant marginal costs. This assumes that the number of competitors is common knowledge among firms. If firms are uncertain about the number of their competitors, there is no pure strategy equilibrium. But in mixed strategies an equilibrium exists. In this...

We analyze differentiated retail industries where shops engage in two-stage competition with respect to opening hours and prices. We demonstrate that retailers with longer opening hours charge higher prices and that opening hour differentiation softens price competition in a way described by a convex function of the proportion of the time that one of the stores is the sole operator. We calculat...

This note investigates the standard Bertrand-Edgeworth duopolistic competition in which two firms sell a homogenous good and have an identical capacity constraint. We examine three firstcome, first-served rationing rules: a) high-to-low rationing where customers arrive in decreasing order of willingness to pay, b) proportional rationing where customer arrivals are independent of willingness to ...

We investigate how price ceilings and floors affect outomces in continuous time, double auction markets with discrete goods and multiple qualities. Since competitive equilibria need not exist in markets with price contols, we investigated the nature of non-price competition and how markets might evolve in its presence. We develop a quality competition model based on matching theory. Equilibria ...

Experts have better information about the appropriate quality of treatment or surplus from trade than their customers. Providing both diagnosis and treatment, this leaves scope for fraud. In a credence good set-up, we experimentally investigate how intensity of price competition and the level of customer information about past expert behavior in uence an expert's incentive to defraud his custom...

We investigate the role of search frictions in markets with price competition and how it leads to sorting of heterogeneous agents. There are two aspects of value creation: the match-value when two agents actually trade, and the probability of trading governed by the search technology. We show that positive assortative matching obtains when complementarities in the former outweigh complementarit...

We relax the assumption of symmetric linear costs in B&L’s (2006) “Matching and Price Competition” and compare the pricing equilibrium that results to the firmoptimal competitive equilibrium. With linear and asymmetric costs, competition may not be localized in the pricing equilibrium, but all other qualitative comparisons of B&L (2006) hold. With non-linear and symmetric costs workers’ average...

This paper proposes a model in which identical sellers of a homogenous product compete in both prices and price frames (i.e., ways to present price information). We model price framing by assuming that firms’ frame choices affect the comparability of their price offers: consumers may fail to compare prices due to frame differentiation, and due to frame complexity. In the symmetric equilibrium t...

Airline markets are characterized by the existence of substantial price dispersion. In this paper we investigate the relationship between daily price dispersion and competition using data related to products offered to business travelers in the Italian airline market. We find that the effect of competition on price dispersion is non-monotonic.