Game theoryClassroom · multi-user
Bertrand Competition — Price Wars
Paired as two firms, you both set a price each round. The cheaper firm captures the whole market, so undercutting spirals the price toward marginal cost — the Bertrand paradox: just two competitors can behave almost like perfect competition.
You’ll learn: See how price competition between just two firms can drive the price all the way down to marginal cost, leaving almost no profit.
- Oligopoly & strategic interaction
- Price competition
- The Bertrand paradox
- Best responses & Nash equilibrium
Teacher guide
Students will learn to
- Experience price competition as one of two firms setting prices each round.
- See why undercutting is always tempting — and where that spiral ends.
- Connect the Bertrand paradox to why some markets are fiercely competitive with only a few sellers.
Before the session — ask
- If you and one competitor sold identical products, how would you set your price?
- Where does undercutting your rival stop being worth it?
After the session — discuss
- How close did prices fall to marginal cost over the rounds?
- Did any pair sustain high prices — and how? What broke it down?
- Why can two price-competing firms end up acting almost like perfect competition?
Timing
- Briefing & pairing3–5 min
- Five pricing rounds6–10 min
- Reveal & discussion8–10 min
Run it with your class
Students join with a code or QR — no account needed. Teachers start a session from the dashboard.