Bertrand
Equilibrium
The only important change is that
firms now set prices rather than quantities.
Each firm is willing to sell as
much quantity
as is demanded at the price it sets.
Same data than in Cournot
Model.
If p1 is above p2, the residual
demand curve facing F1 is zero.
If p1 <p2, the residual demand curve facing
F2 is zero and the residual demand curve facing
F1 equals the market demand .
The only possible Bertrand Equilibrium
(or Nash-in-prices Equilibrium) is attained
when market price equals Marginal Cost.
When both firms charge P = MC,
neither firm profits by changing its price.
If a firm lowers its price, it loses money.
If either firm raises its price, ilt makes
no sales at all.
Sources
:
Modern Industrial Organization, 2nd edition, Dennis .W. Carlton , Jeffrey .M. Peroloff, Addfison-Wesley, 1994
Economie Industrielle ( traduction de la 2ème édition par Fabrice Mazerolle), Dennis .W. Carlton , Jeffrey .M. Peroloff, de Boeck Université, 1998
Gaining and Soustaining Competitive Advantage, Jay. B. Barney, Addison-Wesley, 1997
Contemporary Strategic Analysis, Robert M. Grant, 3th edition, Blackwell, 1998
Strategic Management, Raphael Amit, Professor at Wharton University of Pennsylvania, US
Cours de Microéconomie, Bernard Jaquier, 2003
(c) ECOFINE.COM, Bernard Jaquier, Professor in Economics and Finance, Switzerland, 2020