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Janssen, Maarten C.W.
Rasmusen, Eric
Year of Publication: 
Series/Report no.: 
Tinbergen Institute Discussion Paper 98-083/1
Consider a Bertrand model in which each firm may be inactive with aknown probability, so the number of active firms is uncertain. Thissimple model has a mixed-strategy equilibrium in which industryprofits are positive and decline with the number of firms, the samefeatures which make the Cournot model attractive. Unlike in a Cournotmodel with similar incomplete information, Bertrand profits alwaysncrease in the probability other firms are inactive. Profits declinemore sharply than in the Cournot model, and the pattern is similar tothat found by Bresnahan & Reiss (1991).
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Working Paper

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