In order to understand how markets work, economists study a wide range of market structures. On one end of the spectrum, economists study perfectly competitive markets, which have large numbers of small buyers and sellers. On the other end of the spectrum, economists study monopolies, which are markets with only one seller and no close substitutes for the seller's output. However, there are a lot of market structures in between these two extremes that are certainly worth studying.

While the field of industrial organization is mostly devoted to studying imperfect competition- i.e. market structures that fall in between the extremes of monopoly and perfect competition- a few specific examples of imperfect competition manage to make their way into the more general microeconomic theory curriculum. One of these examples is the Bertrand model of competition, so let's examine that model here.

While the very basic version of the Bertrand model deals with a duopoly- i.e. a market with two sellers- it's pretty straightforward to extend the model to incorporate any number of competing firms. Unlike the Cournot model of imperfect competition, the Bertrand model can apply to markets with product differentiation as well as to markets where all firms' output is essentially the same.  In addition, the Bertrand model assumes that firms compete by choosing prices (and letting those prices dictate the quantities produced) rather than by choosing quantities as in the Cournot model.

Like in the Cournot model, on the other hand, the Bertrand model assumes that all of the companies in the market make their decisions about what price to set at the same time. While this assumption may seem unrealistic if taken literally, the relevant aspect of the assumption is that companies make their decisions before they know what the decisions of other companies in the market are. This, in contrast, seems like a fairly realistic assumption for many markets.