A BEJTE Topics article.

Abstract

This paper investigates mixed strategy equilibria in a capacity-constrained price competition among three firms. It is shown that the equilibria in an asymmetric oligopoly are substantially different from those in a duopoly and symmetric oligopoly. In an asymmetric triopoly, it is possible that (i) a continuum of equilibria exists and that (ii) the lowest price of the smallest firm is higher than that of the others and the smallest firm earns more than the max-min profit in undominated strategies. In particular, the second finding sheds light on a new pricing incentive in Bertrand competitions. As an application, the equilibrium characterizations give rise to a new class of merger paradoxes.

Submitted: July 12, 2008 · Accepted: June 13, 2009 · Published: July 10, 2009

Recommended Citation

Hirata, Daisuke (2009) "Asymmetric Bertrand-Edgeworth Oligopoly and Mergers," The B.E. Journal of Theoretical Economics: Vol. 9 : Iss. 1 (Topics), Article 22.
DOI: 10.2202/1935-1704.1500
Available at: http://www.bepress.com/bejte/vol9/iss1/art22