A Psychological Reexamination of the Bertrand Paradox

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A Psychological Reexamination of the Bertrand Paradox

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title A Psychological Reexamination of the Bertrand Paradox
contributor.author Fatas, Enrique
contributor.author Haruvy, Ernan
contributor.author Morales, Antonio J.
contributor.VIAF 205185198 (Haruvy, E)
description.abstract The Bertrand paradox describes a situation in which two competing firms reach an outcome where both price at marginal cost. In laboratory experiments, this equilibrium is not generally observed. Existing empirical works on Bertrand competition have found evidence for boundedly rational models. We find that such models are useful in organizing behavior in early stages of the game, but less so in later stages. We show that a new model, coarse grid Nash equilibrium, based on the assumption that subjects discretize the strategy space, explains the data better.
identifier.issn 0038-4038
identifier.uri http://hdl.handle.net/10735.1/4002
identifier.bibliographicCitation Fatas, Enrique, Eman Haruvy, and Antonio J. Morales. 2014. "A psychological reexamination of the Bertrand Paradox." Southern Economic Journal 80(4): 948-967.
identifier.volume 80
identifier.issue 4
identifier.startpage 948
subject Bertrand paradox
subject Prices
subject Nash equilibrium
subject Coarse Grid Nash Equilibrium (CGNE)
date.created 2014-04
publisher Univ North Carolina
relation.uri http://dx.doi.org/10.4284/0038-4038-2012.264
rights ©2014 Southern Economic Association
language.iso en
source.journal Southern Economic Journal

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