Bertrand Competition Under Uncertainty June 24, 1996 Eric Rasmusen Abstract Consider a Bertrand model in which each firm may be inactive with a known probability, so the number of active firms is uncertain. This simple model has a mixed-strategy equilib- rium in which industry profits are positive and decline with the number of firms, the same features which make the Cournot model attractive. Unlike in a Cournot model with simi- lar incomplete information, Bertrand profits always increase in the probability other firms are inactive. Profits do decline more sharply than in the Cournot model, and the pattern is similar to that found by Bresnahan & Reiss (1991). Indiana University School of Business, Rm. 456, 1309 E 10th Street, Bloomington, Indiana, 47405-1701. Office: (812) 855-9219. Fax: 812- 855-3354. Email: Erasmuse@Indiana.edu. Web: http://silver.ucs.indiana.edu/ erasmuse. Footnotes beginning with xxx are notes to myself for redrafting. I intend to retain copyright on this article, granting only non-exclusive rights to any journal that may wish to publish it. —-