Bertrand competition

Michael R. Baye and Dan Kovenock
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Abstract

This article presents the classic Bertrand model of oligopolistic price competition and shows how alternative assumptions on economic primitives – such as the structure of demand and cost functions, tie-breaking rules, and product differentiation – shape Nash equilibrium prices and profits. We also discuss the related Bertrand–Edgeworth model of price competition in which consumers may be rationed – either strategically or due to capacity constraints – and illustrate how alternative rationing rules influence equilibrium.
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How to cite this article

Baye, Michael R. and Dan Kovenock. "Bertrand competition." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 29 May 2017 <http://www.dictionaryofeconomics.com/article?id=pde2008_B000336> doi:10.1057/9780230226203.0129

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