Mixed oligopoly, endogenous timing and mergers

Naya, José Méndez

doi:10.1111/j.1742-7363.2011.00164.x

Cited by 9 publications

(1 citation statement)

References 15 publications

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“…The Bertrand game is a model about price competition between players, which presents the interactions among players that make price decisions and their consumers that choose quantities at a set prices [1]. There are a lot of researches about the Bertrand game, such as equilibrium of game models [2,3], strategic choice of timing [4,5], asymmetric costs [6][7][8], and some applications to the economic problems [9]. Those above achievements are based on the assumption that players are fully rational and only desire to maximize their own profits.…”

Section: Introductionmentioning

confidence: 99%

Bertrand Game with Nash Bargaining Fairness Concern

Tan

2019

Complexity

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The classical Bertrand game is assumed that players are perfectly rational. However, many empirical researches indicate that people have bounded rational behavior with fairness concern, which is important in the two-person game and has attracted much attention. In this paper, fairness concern is incorporated into the Bertrand game with two homogeneous products and the effect of fairness concern on this extended Bertrand game is explored. Nash bargaining solution of player is applied to be his own fairness reference point. Then, a Bertrand game model with fairness concern is established, and its equilibrium price is also derived and analyzed. It is shown from some numerical examples that fairness concern and bargaining power of players have a significant influence on their equilibrium price, expected profits, and utilities. As a player gets more fair-minded, if the other player has a less focus on fairness, the price competition between them will be intensified and both of them suffer loss. Thus, fairness concern may be advantageous or disadvantageous for players. In most situations, the fairness concern behavior is not beneficial for players. Additionally, the effect of bargaining power is relative to fairness concern. A player who manufactures a low-cost product should have a weak bargaining power if he terribly focuses on fairness and should have a strong bargaining power if he pays little attention to fairness. However, a player who manufactures a high-cost product should have a weak bargaining power if he is rarely concerned about fairness. Anyway, the same bargaining power is the best for two players.

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