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Bertrand-Edgeworth equilibria when firms avoid turning customers away

Dixon, Huw David 1990. Bertrand-Edgeworth equilibria when firms avoid turning customers away. Journal of Industrial Economics 39 (2) , pp. 131-146.

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This paper provides a simple solution to the problem of nonexistence of pure-strategy equilibria in Bertrand-Edgeworth models with strictly convex costs. The voluntary-trading constraint in standard Bertrand-Edgeworth models is generalized to allow for there being costs incurred when customers are turned away. So long as the industry is sufficiently large, the presence of such costs ensures that the competitive price will be an equilibrium. There will be other single price equilibria, but if the offense costs are small, all equilibria will be close to the competitive outcome.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Subjects: H Social Sciences > HB Economic Theory
Publisher: Wiley-Blackwell
Last Modified: 04 Jun 2017 04:57

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