Definition ∞ Bertrand competition describes a market model where firms compete primarily on price, leading to prices dropping to marginal cost levels. In this economic framework, even with only two firms, intense price rivalry can result in zero economic profits. This theoretical model helps analyze pricing strategies and market outcomes under specific competitive conditions. It assumes homogeneous products and consumers who always select the lowest-priced option.
Context ∞ While Bertrand competition directly applies to traditional economics, its principles can be considered when analyzing specific segments of the digital asset market, particularly concerning stablecoin pegging or fee structures on highly liquid, fungible asset exchanges. A key discussion involves whether certain automated market maker pools, when offering nearly identical asset pairs, exhibit tendencies towards price competition that reduce transaction costs for users. Future analysis might assess how decentralized exchanges with similar offerings compete for volume through fee reductions.
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