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Author Rodolphe Dos Santos Ferreira ♦ Dufourt, Frédéric
Source Hyper Articles en Ligne (HAL)
Content type Text
Publisher Wiley
File Format PDF
Language English
Subject Keyword Free entry equilibrium ♦ zero-profit condition ♦ oligopolistic competition ♦ shs ♦ Humanities and Social Sciences/Economies and finances
Abstract Free entry equilibria are usually characterized by the zero profit condition. We plead instead for a strict application of theNash equilibriumconcept to a symmetric simultaneous game played by actual and potential entrants, producing under decreasing average cost. Equilibrium is then typically indeterminate, with a number of active firms varying between an upper bound imposed by profitability and a lower bound required by sustainability. We use a canonical model with strategies represented by prices, although covering standard regimes of quantity and price competition, to show that in equilibrium the critical (profit maximizing) price must lie between the break-even and the limit prices.
ISSN 17427355
Educational Use Research
Learning Resource Type Article
Publisher Date 2007-05-01
e-ISSN 17427363
Journal International Journal of Economic Theory
Volume Number 3
Issue Number 2
Page Count 20
Starting Page 75
Ending Page 94