The paper describes an experiment designed to test if the equilibrium in a market characterized by capacity precommitment followed by price competition, as in the Kreps and Scheinkman model, conforms with the outcome predicted by that model, which is that capacities coincide with Cournot output...

The classical price competition model (named after Bertrand), prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the Bertrand Paradox. Many...