Abstract
Abstract
Duopolies are one of the simplest economic situations where interactions between firms determine market behavior. The standard model of a price-setting duopoly is the Bertrand model, which has the unique solution that both firms set their prices equal to their costs—a paradoxical result where both firms obtain zero profit, which is generally not observed in real market duopolies. Here we propose a new game theory model for a price-setting duopoly, which we show resolves the paradoxical behavior of the Bertrand model and provides a consistent general model for duopolies.
Subject
Artificial Intelligence,Computer Networks and Communications,Computer Science Applications,Information Systems
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