BERTRAND GAME Meaning and
Definition
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A Bertrand game refers to a type of game theory scenario that involves two players or firms making simultaneous decisions regarding their pricing strategy for an identical product. The game is named after the French mathematician Joseph Bertrand who introduced this concept.
In a Bertrand game, both players are assumed to have perfect information about the market and the strategies chosen by their competitors. The objective of each player is to maximize their profits by setting an optimal price for their product. However, unlike other pricing games, in a Bertrand game, players compete on the basis of price rather than quantity.
The unique characteristic of a Bertrand game is the assumption of perfect competition. It is assumed that consumers have perfect information about product prices and will always choose the product with the lower price. This assumption leads to a fierce price competition between the players.
In equilibrium, the outcome of a Bertrand game is a situation where both players set their prices exactly the same, resulting in zero economic profits for both players. This equilibrium is known as the Bertrand-Nash equilibrium.
Overall, a Bertrand game represents a scenario where firms competitively set prices in a market with perfect competition, aiming to attract customers by offering the lowest price.
Common Misspellings for BERTRAND GAME
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Etymology of BERTRAND GAME
The term Bertrand game is named after Joseph Louis François Bertrand, a French mathematician who introduced the game in 1887. The word game itself comes from the Old English word gamen, which means amusement or fun.
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