SFB 303 Discussion Paper No. A - 165
Author: Bester, Helmut
Title: Sequential Competition in Bertrand - Edgeworth Oligopoly
Abstract: The paper considers a Bertrand-Edgeworth model of a single market in which consumers enter
successively. At each consumer's arrival the firms compete by setting prices. They are endowed with
exogenously given initial capacities, and so each consumer's purchasing decision determines the available
remaining capacities in the next price setting stage. The market always has a subgame-perfect equilibrium in
pure strategies. When the market is sufficiently large, the equilibrium approaches the perfectly competitive
outcome as the time between the consumers' arrivals or the firms' discount rate tend to zero.
Keywords: oligopoly theory, price competition, subgame-perfect equilibrium
Creation-Date: March 1988
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