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2884. Empirical and Theoretical Results on Bertrand Duopoly with Interaction

Invited abstract in session TC-59: Pricing Strategies, stream Pricing and Revenue Management.

Tuesday, 12:30-14:00
Room: S08 (building: 101)

Authors (first author is the speaker)

1. Arik Sadeh
Industrial Engineering and Technology Management Faculty, HIT Holon Institute of Technology

Abstract

The Bertrand competition is an arena where firms compete in the price market. In Cournot games, firms compete by setting their quantities in the market. The attractiveness of Bertrand's games in economics is the visibility of prices to all competitors.
Games are commonly used in markets with a few decision makers where the playing firms see downward demand functions.
In this study, we analyze two firms in a duopoly market. The firms sell nonidentical products that satisfy the same customers' needs.
The demand function for each firm is based on its price and the competitor's price, along with an interaction of both prices on each demand. We show that there is more than one Nash equilibrium point that leads to stability questions,
The role of the cost function, its functional form, and parameters impact the number of potential equilibrium points. This is an essential issue in markets with technological and innovative products.
The dynamics of Bertrand's games can serve as a mechanism to reveal the costs of the competition.
Along with the optimal paths for the players under varying circumstances, we developed a simulator to handle various scenarios relevant to research.

Keywords

Status: accepted

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