A psychological reexamination of the Bertrand paradox

Fatas, Enrique, Haruvy, Ernan and Morales, Antonio J. (2014) A psychological reexamination of the Bertrand paradox. Southern Economic Journal, 80 (4). pp. 948-967. ISSN 0038-4038

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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.

Item Type: Article
Faculty \ School:
Faculty of Social Sciences > School of Economics
Related URLs:
Depositing User: Pure Connector
Date Deposited: 25 Jul 2014 13:32
Last Modified: 21 Oct 2022 00:01
URI: https://ueaeprints.uea.ac.uk/id/eprint/49685
DOI: 10.4284/0038-4038-2012.264

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