Approximate Bertrand Equilibria in a Replicated Industry

Review of Economic Studies (Impact Factor: 2.81). 02/1987; 54(1):47-62. DOI: 10.2307/2297445
Source: RePEc


The paper considers the existence and properties of approximate Bertrand equilibr ia in a replicated industry. Price setting firms produce a homogeneous product w ith weakly convex costs. The main results are that an e-equilibrium exists if th e industry is large enough; and that if the e is small enough, and the industry large enough, any e-equilibrium is approximately competitive. These resultsdepe nd on how contingent demand is specified. Copyright 1987 by The Review of Economic Studies Limited.

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Available from: Huw Dixon
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    • "For the basic definition we rely on Tijs (1981). Dixon (1987) uses the idea of market replication in the context of price competition. While our form of replication is different, our analysis is inspired by his concept. "
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    • "The competitive result is robust to a change in the equilibrium concept. Dixon (1987) and Borgers (1992) obtain convergence to the competitive equilibrium using the ε-equilibrium and iterated elimination of dominated strategies solution concepts, respectively. "
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    • "Let us consider a Bertrand duopoly where the firms decide on both their price and output levels and the firms are free to supply less than the quantity demanded. Edgeworth (1897) argues that in such models equilibria in pure strategies may not exist (see Dixon (1987), or Friedman (1988) for formal statements of the problem). In the literature this is often referred to as the Edgeworth paradox. "
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