Economic Theory Bulletin

, Volume 4, Issue 2, pp 151–166 | Cite as

Stability in price competition revisited

  • Marta Faias
  • Javier Hervés-Estévez
  • Emma Moreno-García
Research Article


We consider consumers with the same reservation price, who desire to buy at most one unit of a good. Firms compete only in prices, but there are other features firms cannot control that would eventually lead an agent to buy in one firm or another. We introduce such uncertainty in a model of a price competition game with incomplete information. This competition takes place under stability and we provide equilibrium existence results. We analyze different specifications of residual demands which yield further interpretations that deepen the phenomenon of price dispersion, Bertrand’s paradox and market power.


Price competition Incomplete information Nash equilibrium Approximate equilibrium Price dispersion 

JEL Classification

D4 L13 L00 L1 C70 


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Copyright information

© Society for the Advancement of Economic Theory 2015

Authors and Affiliations

  • Marta Faias
    • 1
  • Javier Hervés-Estévez
    • 2
  • Emma Moreno-García
    • 3
  1. 1.Universidade Nova de Lisboa, FCT and CMALisbonPortugal
  2. 2.Universidad de VigoVigoSpain
  3. 3.Universidad de SalamancaSalamancaSpain

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