Economics · Microeconomics
The 'Bertrand Paradox' in oligopoly theory refers to the finding that:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Firms will set prices above marginal cost even under homogeneous product price competition
- 2Quantity competition yields lower profits than price competition
- 3Pure price competition between as few as two firms can drive prices down to marginal cost, yielding a competitive outcome✓
- 4Firms in a duopoly can easily earn collusion/monopoly profits
Correct answer
Pure price competition between as few as two firms can drive prices down to marginal cost, yielding a competitive outcome
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