Correlated Equilibria in Homogenous Good Bertrand Competition

Abstract

We show that there is a unique correlated equilibrium, identical to the unique Nash equilibrium, in the classic oligopoly model with homogenous goods.This provides a theoretical underpinning for the so-called Bertrand paradox and also generalizes earlier results on mixed-strategy Nash equilibria. Our proof generalizes to asymmetric marginal costs and arbitrarily many players.