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The impact of the number of sellers on quantal response equilibrium predictions in Bertrand oligopolies
Author(s) -
Bayer RalphC,
Dong Chaohua,
Wu Hang
Publication year - 2018
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12298
Subject(s) - bertrand competition , oligopoly , economics , mathematical economics , microeconomics , function (biology) , econometrics , cournot competition , evolutionary biology , biology
This paper studies how increasing the number of sellers in a Bertrand oligopoly with homogenous goods affects the equilibrium price level predicted by logistic quantal response equilibrium (LQRE) and power‐function QRE (PQRE). We show that increasing the number of sellers reduces the average posted price in a PQRE, but can increase the average posted price in an LQRE. Our results indicate that the comparative‐static predictions of QRE (McKelvey & Palfrey, 1995, Games Econ Behav , 10, 6–38) are not necessarily robust to changes of the quantal response function.