The impact of the number of sellers on quantal response equilibrium predictions in Bertrand oligopolies: BAYER et al.

This paper studies how increasing the number of sellers in a Bertrand oligopoly with homogenous goods affects the equilibrium price level predicted by logistic quantal response equilibrium (LQRE) and power-function QRE (PQRE). We show that increasing the number of sellers reduces the average posted price in a PQRE, but can increase the average posted price in an LQRE. Our results indicate that the comparative-static predictions of QRE (McKelvey & Palfrey, 1995, Games Econ Behav, 10, 6-38) are not necessarily robust to changes of the quantal response function.