Correlated equilibria in homogeneous good Bertrand competition |
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Institution: | 1. Waseda University, Japan;2. Hokuriku University, Japan |
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Abstract: | We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogeneous goods and identical marginal costs. This provides a theoretical underpinning for the so-called “Bertrand paradox” as well as its most general formulation to date. Our proof generalizes to asymmetric marginal costs and arbitrarily many players in the following way: The market price cannot be higher than the second lowest marginal cost in any correlated equilibrium. |
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Keywords: | Bertrand paradox Correlated equilibrium Price competition |
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