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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