Correlated equilibria in homogenous good Bertrand competition

Ole Jann (Department of Economics, Copenhagen University) and Christoph Schottmuller (Department of Economics, Copenhagen University) offer Correlated equilibria in homogenous good Bertrand competition.

ABSTRACT: We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic Bertrand oligopoly model with homogenous goods. This provides a theoretical underpinning for the so-called "Bertrand paradox" and also generalizes earlier results on mixed-strategy Nash equilibria. Our proof generalizes to asymmetric marginal costs and arbitrarily many players.