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`https://hdl.handle.net/10216/82218`

Author(s): | Fernanda A. Ferreira Alberto A. Pinto |

Title: | Bertrand model under incomplete information |

Issue Date: | 2008 |

Abstract: | We consider a Bertrand duopoly model with unknown costs. The firms' aim is to choose the price of its product according to the well-known concept of Bayesian Nash equilibrium. The chooses are made simultaneously by both firms.In this paper, we suppose that each firm has two different technologies, and uses one of them according to a certain probability distribution. The use of either one or the other technology affects the unitary production cost. We show that this game has exactly one Bayesian Nash equilibrium. We analyse the advantages, for firms and for consumers, of using the technology with highest production cost versus the one with cheapest production cost. We prove that the expected profit of each firm increases with the variance of its production costs. We also show that the expected price of each good increases with both expected production costs, being the effect of the expected production costs of the rival dominated by the effect of the own expected production costs. |

Description: | We consider a Bertrand duopoly model with unknown costs. The firms' aim is to choose the price of its product according to the well-known concept of Bayesian Nash equilibrium. The chooses are made simultaneously by both firms.In this paper, we suppose that each firm has two different technologies, and uses one of them according to a certain probability distribution. The use of either one or the other technology affects the unitary production cost. We show that this game has exactly one Bayesian Nash equilibrium. We analyse the advantages, for firms and for consumers, of using the technology with highest production cost versus the one with cheapest production cost. We prove that the expected profit of each firm increases with the variance of its production costs. We also show that the expected price of each good increases with both expected production costs, being the effect of the expected production costs of the rival dominated by the effect of the own expected production costs. |

Subject: | Matemática Mathematics |

Scientific areas: | Ciências exactas e naturais::Matemática Natural sciences::Mathematics |

URI: | https://repositorio-aberto.up.pt/handle/10216/82218 |

Source: | NUMERICAL ANALYSIS AND APPLIED MATHEMATICS: 6th International Conference on Numerical Analysis and Applied Mathematics 2008 |

Document Type: | Artigo em Livro de Atas de Conferência Internacional |

Rights: | openAccess |

License: | https://creativecommons.org/licenses/by-nc/4.0/ |

Appears in Collections: | FCUP - Artigo em Livro de Atas de Conferência Internacional |

This item is licensed under a Creative Commons License