SFB 303 Discussion Paper No. A - 209
Author: Bester, Helmut
Title: Bertrand Equilibrium in a Differentiated Duopoly
Abstract: The paper studies the stability of price competition in a horizontally differentiated duopoly. The firms'
demand is derived from a distribution of consumer preferences. This description of the consumer sector is
applicable to a large class of differentiated commodity markets, including spatial competition models. We show
that here is a (pure) price setting equilibrium when consumer tastes are sufficiently dispersed. Further conditions
on the disperdness of preferences guarantee uniqueness of the equilibrium. In addition, we examine the relation
between consumer preferences and the competitiveness and efficiency of the equilibrium outcome.
Keywords: price competition, product differentiation, oligopoly theory
Creation-Date: November 1988
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