Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, October 26, 2009

Free Entry Bertrand Competition

Posted by D. Daniel Sokol

Prabal Roy Chowdhury (Indian Statistical Institute, Delhi Center) explains Free Entry Bertrand Competition.

ABSTRACT: This paper examines Bertrand competition under free entry, when firm size vis-a-vis market size is exogenously given. A free entry Bertrand Nash equilibrium (FEBE) exists if and only if relative market size is sufficiently large. Further, there is a unique coalition-proof Nash equilibrium price that corresponds to the minimum FEBE price, leads to average cost pricing for all active firms and is decreasing in market size.

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