Which oligopoly model results in firms successively undercutting their rivals' prices until the competitive outcome is reached?

Question

Quizplus · Accepted Answer

In the Bertrand model, firms compete on price and will undercut each other's prices to try and capture a larger market share. This process continues until the competitive outcome is reached, where firms are earning zero economic profit (normal profit). The Cournot model assumes that firms compete on quantity rather than price, while the contestable market model assumes that markets remain contestable even in the presence of a dominant firm. The monopolistic competition model assumes a large number of small firms with differentiated products. Therefore, the best choice is C) The Bertrand model of oligopoly.

Which Oligopoly Model Results in Firms Successively Undercutting Their Rivals