Bertrand Competition Under Uncertainty
University of Vienna
Eric Bennett Rasmusen
Indiana University Bloomington - Department of Business Economics & Public Policy
Journal of Industrial Economics, Vol. 50, pp. 11-21, 2002
We look at a Bertrand model in which each firm may be inactive with a known probability, so the number of active firms is uncertain. The model has a mixed-strategy equilibrium, in which industry profits are positive and decline with the number of firms, the same features which make the Cournot model attractive. Unlike those in a Cournot model with similar uncertainty, Bertrand profits always increase in the probability that firms are inactive. Profits decline more sharply than in the Cournot model, the pattern found empirically in Bresnahan and Reiss .
Number of Pages in PDF File: 11Accepted Paper Series
Date posted: April 25, 2002
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