Please use this identifier to cite or link to this item: https://hdl.handle.net/10216/91355
Author(s): Fernanda A. Ferreira
Alberto A. Pinto
Title: Uncertainty on a Bertrand Duopoly with Product Differentiation
Issue Date: 2011
Abstract: The conclusions of the Bertrand model of competition are substantially altered by the presence of either differentiated goods or asymmetric information about rival's production costs. In this paper, we consider a Bertrand competition, with differentiated goods. Furthermore, 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 do ex-ante and ex-post analyses of firms' profits and market prices. 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: The conclusions of the Bertrand model of competition are substantially altered by the presence of either differentiated goods or asymmetric information about rival's production costs. In this paper, we consider a Bertrand competition, with differentiated goods. Furthermore, 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 do ex-ante and ex-post analyses of firms' profits and market prices. 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://hdl.handle.net/10216/91355
Source: Nonlinear Science and Complexity
Document Type: Artigo em Livro de Atas de Conferência Internacional
Rights: restrictedAccess
Appears in Collections:FCUP - Artigo em Livro de Atas de Conferência Internacional

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