midGame Theory
What is Bertrand competition model?
Updated May 16, 2026
Short answer
Bertrand competition is a model where firms compete by setting prices simultaneously.
Deep explanation
Each firm sets prices, assuming competitors' prices are fixed. In homogeneous goods, competition drives prices down to marginal cost.
Real-world example
Used in retail fuel pricing competition.
Common mistakes
- Assuming firms compete on quantity instead of price.
Follow-up questions
- Why does Bertrand lead to price war?
- How is Cournot different?