Premium
The Bertrand Paradox, the Useless Auctioneer and the L aunhardt Model
Author(s) -
Lambertini Luca,
Mosca Manuela
Publication year - 2014
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12028
Subject(s) - duopoly , economics , competition (biology) , function (biology) , constant (computer programming) , bertrand competition , microeconomics , returns to scale , tracing , mathematical economics , production (economics) , cournot competition , oligopoly , computer science , microbiology and biotechnology , biology , ecology , programming language , operating system
We revisit the C ournot– B ertrand debate in the light of C ournot, E dgeworth and L aunhardt, tracing back to L aunhardt the origin of price competition in duopoly models with constant returns to scale. Then, we discuss the formalisation of consumer utility function for differentiated products, first appearing in L aunhardt and then in B owley. This allows us to point out that assuming that firms know the demand function(s) is equivalent to assuming that they know the structure of consumer preferences. Therefore, we argue that there is no role for the auctioneer, either in C ournot or in W alras.