Resumen de Competitive equilibrium as the outcome of a capacity-price game

Maximo A. De Francesco

• The paper analyses Bertrand competition under free entry for a single market of a homogeneous commodity. It is shown that,similarly as in the Cournot setting (see Novshek, 1980, Novshek and Sonnenschein, 1978), in a �large� market the equilibrium of the capacity-price game exhibits long-run competitive features. Production is assumed to take place in the short run at constant variable unit cost c up to capacity; in the long run, average cost at full capacity is assumed to be constant at c + k, k being the cost of a unit of capacity.