Abstract
In this paper, we present a game theoretic framework for Cournot–Bertrand competition based on a nonlinear price function. The competition is between two firms and is assumed to take place in terms of pricing decision and quantity produced. However, the proposed objective function has not been used in literature before, yet the throughput obtained in this paper generalizes some of the existing results in literature. The competitive interaction between firms is described and analyzed using best-reply reaction, proposed adaptive adjustment and bounded rationality approach. The condition of stability of Nash equilibrium (NE) is induced by these approaches. Interestingly, we prove that there exists exactly a unique NE. Furthermore, it is noticed that when firms adopt best-reply and the proposed adaptive adjustment, the firms’ strategic variables become asymptotically stable. On the contrary, when the bounded rationality is used both quantity and price behave chaotically due to bifurcation occurred.
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Acknowledgments
This work was supported by King Saud University, Deanship of Scientific Research, College of Science Research Center.
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Askar, S.S. On Cournot–Bertrand competition with differentiated products. Ann Oper Res 223, 81–93 (2014). https://doi.org/10.1007/s10479-014-1612-8
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DOI: https://doi.org/10.1007/s10479-014-1612-8