Bertrand-Edgeworth Oligopoly in Large Markets
Open Access
- 1 April 1986
- journal article
- Published by Oxford University Press (OUP) in The Review of Economic Studies
- Vol. 53 (2) , 175-204
- https://doi.org/10.2307/2297646
Abstract
The relation between perfectly competitive and monopolistically competitive equilibria is analysed for a Bertrand-Edgeworth model of a single market in which capacity constrained firms choose prices as strategies. The market always has a Nash equilibrium in pure or mixed strategies. As the number of firms increases, the corresponding equilibria converge in distribution to a perfectly competitive price. This result provides a justification for perfect competition that is based on an explicit account of price formation. However, monopoly prices persist with a positive but vanishing probability. Regularity or well defined inverse demand functions are not required.Keywords
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