Abstract
This chapter considers similar industries as those we analyzed in Chap. 2, but assuming that firms compete in prices. In this setting, every firm simultaneously and independently chooses the price for its product. When firms sell a homogeneous good (such as the same cereal variety, cement, or other minerals), the firm setting the lowest price captures all sales while all other firms sell zero units. When firms sell heterogeneous goods (such as clothing), the firm setting the lowest price may attract more, but not all customers.
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References
Irmean, A., & Thisse, J.-F. (1998). Competition in multi-characteristics spaces: hotelling was almost right. Journal of Economic Theory, 78, 76–102.
Kreps, D., & Scheinkman, K. (1983). Quantity precommitment and Bertrand competition yield Cournot outcomes. Bell Journal of Economics, 14, 326–37.
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Choi, PS., Dunaway, E., Munoz-Garcia, F. (2021). Simultaneous Price Competition. In: Industrial Organization. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-57284-6_3
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DOI: https://doi.org/10.1007/978-3-030-57284-6_3
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