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Delbono, Flavio ; Lambertini, Luca
(2015)
Bertrand versus Cournot with Convex Variable Costs.
Bologna:
Dipartimento di Scienze economiche DSE,
p. 17.
DOI 10.6092/unibo/amsacta/4168.
In: Quaderni - Working Paper DSE
(994).
ISSN 2282-6483.
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Abstract
Within a simple model of homogeneous oligopoly, we show that the traditional ranking between Bertrand and Cournot equilibria may be reversed. For price setting entails a continuum of price equilibria under convex variable costs, departure from marginal cost pricing may be observed. As a consequence, Bertrand-Nash equilibrium profits (welfare) may be higher (lower) than Cournot-Nash ones. The reversal of the standard rankings occurs when pricing strategies mimic collusive behaviour.
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