Market Transparency and Bertrand Competition

Abstract

We investigate the effects of market transparency on prices in the Bertrand duopoly model for both the cases of strategic complementarities and strategic substitutes. For the former class of games conventional wisdom concerning prices is confirmed, since they decrease. The consumers are always better off with higher transparency but changes in firm's profits are ambiguous. For the latter class of games, an increase in market transparency may lead to an increase in one of the prices, which implies ambiguity in consumers' utility and firms' profits.

Keywords: Bertrand duopoly, market transparency

JEL Classification: L13, L15, L40