Imitation and Crowd: A Different Approach to the Bertrand Paradox
8 Pages Posted: 28 Nov 2003
Date Written: February 24, 2003
This paper provides the Nash equilibrium under homogeneous duopoly a la Bertrand. The optimal consumers' behaviour is obtained assuming a specific externality in the utility function. This externality permits to consider at the same time, and not alternatively, the imitation and the crowd effect, which are opposite force at work. The result gives prices over marginal cost and the strong sensibility of preferences to the crowd effect.
Keywords: Bertrand, homogeneous duopoly, externalities, imitation, crowd, vanity, conformity
JEL Classification: D11, D62, L11, Ll3
Suggested Citation: Suggested Citation