Differentiated Bertrand competition

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As a solution to the Bertrand paradox (economics) it has been suggested that each firm produces a somewhat differentiated product and consequently faces a demand curve that is downward-sloping for all levels of the firm's price. An increase in a competitor's price is represented as an increase (for example, an upward shift) of the firm's demand curve. As a result, when a competitor raises price, generally a firm can also raise its own price and increase its profits.

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Merger simulation models ordinarily assume differentiated Bertrand competition within a market that includes the merging firms.

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