This paper introduces a simple extensive form pricing game.The Bertrand outcome is a Nash equilibrium outcome in this game, but it is not necessarily subgame perfect.The subgame perfect equilibrium outcome features the following comparative static properties.The more similar firms are, the higher the equilibrium price.Further, a new firm that enters the industry or an existing firm that becomes more efficient can raise the equilibrium price.The subgame perfect equilibrium is used to formalize price leadership, joint dominance and efficiency o¤ence.
|Place of Publication||Tilburg|
|Number of pages||50|
|Publication status||Published - 2002|
|Name||CentER Discussion Paper|
- game theory
- Nash equilibrium
- price competition