What is the difference between Bertrand and Cournot?
What is the difference between Bertrand and Cournot?
Bertrand is a model that competes on price while Cournot is model that competes on quantities (sales volume).
Is Bertrand perfect competition?
The Bertrand outcome is the same as perfect competition, since P=MC, and so it is equally efficient.
What is a Bertrand market?
Bertrand competition is a model of competition used in economics, named after Joseph Louis François Bertrand (1822–1900). Firms compete by setting prices simultaneously and consumers want to buy everything from a firm with a lower price (since the product is homogeneous and there are no consumer search costs).
Why is the Bertrand model useful?
They are also used in merger analysis, to see whether a proposed merger poses a competition concern. Moreover the traditional Cournot and Bertrand models provide a useful “rule of thumb” and help to set a benchmark for analysis, explaining what can happen in different types of markets.
What is Bertrand paradox oligopoly?
The paradox is that in models such as Cournot competition, an increase in the number of firms is associated with a convergence of prices to marginal costs. In these alternative models of oligopoly, a small number of firms earn positive profits by charging prices above cost.
What is Bertrand behavior?
Bertrand competition is a model of competition used in economics, named after Joseph Louis François Bertrand (1822–1900). In his review, Bertrand argued that if firms chose prices rather than quantities, then the competitive outcome would occur with price equal to marginal cost.
Why is it called the Bertrand paradox?
In economics and commerce, the Bertrand paradox — named after its creator, Joseph Bertrand — describes a situation in which two players (firms) reach a state of Nash equilibrium where both firms charge a price equal to marginal cost (“MC”). It follows that demand is infinitely price-elastic.
