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Price competition and market concentration : an experimental study
Uppsala University, Humanistisk-samhällsvetenskapliga vetenskapsområdet, Faculty of Social Sciences, Department of Economics.
Uppsala University, Humanistisk-samhällsvetenskapliga vetenskapsområdet, Faculty of Social Sciences, Department of Economics.
1998 (English)Report (Other academic)
Abstract [en]

The classical price competition model (named after Bertrand), prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the"Bertrand Paradox". Many theoretical problems with the original model have been considered as an explanation of the paradox in the literature. In this paper we experimentally investigate a model which is immune to the theoretical critique of the original model. We find, nevertheless, that the outcome does depend on the number of competitors: the Bertrand solution does not predict well when the number of competitors is two, but after some opportunities for learning are provided it tends to predict well when the number of competitors is three or four. A bounded rationality explanation of this is suggested.

Place, publisher, year, edition, pages
Uppsala: Nationalekonomiska institutionen , 1998. , p. 19
Series
Working paper, ISSN 0284-2904
Keyword [en]
Economics
Keyword [sv]
Nationalekonomi
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-2414ISBN: 99-2616366-1 OAI: oai:DiVA.org:uu-2414DiVA, id: diva2:128675
Available from: 1998-01-01 Created: 1998-01-01

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CiteExportLink to record
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Citation style
  • apa
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  • de-DE
  • en-GB
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  • nn-NO
  • nn-NB
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  • Other locale
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Output format
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