, Volume 24, Issue 2, pp 307-324

Coalition-proof Bertrand equilibria

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This paper examines the coalition-proof Nash equilibria of a Bertrand model of price competition where firms supply all demand. When firms are asymmetric we prove existence and provide a sufficient condition for uniqueness. For symmetric firms, we show that an equilibrium is necessarily unique. We also examine whether this unique equilibrium outcome is implementable through a sequential move game where the firms take turns at announcing prices. Finally we examine the limiting property of such equilibria as the number of firms go to infinity.

Received: 20 March 2002, Revised: 5 August 2003

JEL Classification Numbers:

D43, D41, L13.

Correspondence to: Kunal Sengupta
We are deeply indebted to an anonymous referee for very helpful and incisive comments that led to substantial improvements in the paper. We also gratefully acknowledge the hospitality of the Department of Finance, Hong Kong University of Science and Technology where much of the work on this paper was carried out.