Author(s): Peter Funk (1995)
Journal: Journal of Economic Theory, v. 67 iss. 2, pp. 436-66.
Abstract:
This article studies the approximate Bertrand equilibria of a large but finite economy with free entry
for firms and small efficient scales. It establishes the equivalence of the set of regular Walras equilibria
of a constant returns to scale limit economy and the set of limits of regular sequences of approximate
Bertrand equilibria. This gives a foundation to the Walrasian hypothesis of perfect competition in explaining
why firms behave as if they were price-takers and why they set prices that clear markets.
Keywords: Competition; Entry; Equilibria; Firm; Firms; Walrasian
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