Bertrand and Price-Taking Equilibria in Markets with Product Differentiation
University of CEMA Working Paper No. 369
10 Pages Posted: 5 Dec 2007
Date Written: February 2008
Abstract
In this paper we show that a homogeneous-product market with multiple Bertrand equilibria becomes a market with a single Bertrand equilibrium when we introduce a small degree of product differentiation. When differentiation tends to zero, that Bertrand equilibrium converges to the unique price-taking equilibrium of the homogeneous-product market, which is in turn one of the multiple Bertrand equilibria for that market.
Keywords: Bertrand equilibrium, price-taking equilibrium, product differentiation
JEL Classification: D43, L13
Suggested Citation: Suggested Citation
Coloma, German, Bertrand and Price-Taking Equilibria in Markets with Product Differentiation (February 2008). University of CEMA Working Paper No. 369, Available at SSRN: https://ssrn.com/abstract=1037821 or http://dx.doi.org/10.2139/ssrn.1037821
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