Thursday, November 20, 2014
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.