Abstract
Non-existence of a pure-strategy Nash equilibrium is a persistent problem in oligopoly models where sellers compete in prices and quantities. At the heart of this problem are unserved customers who are still willing to visit a less preferred supplier (i.e., so-called spillover demand). This note develops a consumer behavior model with spillover demand. Within this model there is a class of demand specifications for which a pure-strategy Nash equilibrium exists. This price-quantity equilibrium is shown to coincide with the Bertrand price equilibrium.
Original language | English |
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Article number | 110061 |
Number of pages | 4 |
Journal | Economics Letters |
Volume | 208 |
DOIs | |
Publication status | Published - 1 Nov 2021 |
JEL classifications
- d40 - Market Structure and Pricing: General
- l10 - Market Structure, Firm Strategy, and Market Performance: General
Keywords
- Bertrand-Edgeworth competition
- Edgeworth paradox
- Oligopoly theory
- Price-quantity competition
- Spillover demand
- BERTRAND
- COMPETITION