Bertrandkonkurranse

Bertrandkonkurranse refers to a model of oligopoly where firms compete by setting prices simultaneously. This concept was introduced by the French mathematician Joseph Bertrand in 1883. In a Bertrand duopoly, two firms produce a homogeneous product and have identical constant marginal costs. Consumers will always buy from the firm with the lower price. If the prices are the same, consumers are indifferent and split their demand. The core outcome of the Bertrand model is that price competition drives prices down to the marginal cost of production. This is often referred to as the Bertrand paradox because it suggests that even with only two firms, the market outcome is as efficient as perfect competition, with zero economic profit for the firms. The model assumes perfect information, no capacity constraints, and no product differentiation. If firms have different marginal costs, the firm with the lower marginal cost will capture the entire market by setting a price just below the higher-cost firm's marginal cost. The Bertrand model highlights the power of price competition in driving down prices and profits.