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Bertrand duopoly model
(1883)
Developed by French mathematician Joseph Bertrand (1822-1903), Bertrand duopoly model is a variant of the standard duopoly (a market characterized by two suppliers).
A supplier in the Bertrand duopoly assumes his competitor will not change prices in response to his price cuts.
If each follows this logic, an equilibrium will be established and neither firm will benefit from charging a different price, thereby making price equal to marginal cost.
Bertrand duopoly model has been criticized because it ignores production costs and entry by new firms.
Also see: Cournot duopoly model, duopoly theory
Source:
M Shubik, Strategy and Market Structure (New York, 1959)
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