Irrelevance of the choice of strategic variables in duopoly under relative profit maximization
AbstractWe study the choice of strategic variables by firms in a duopoly in which two firms produce differentiated substitutable goods and each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We consider a two stage game such that in the first stage the firms choose their strategic variables and in the second stage they determine the values of their strategic variables. We show that when the firms maximize their relative profits, the choice of strategic variables is irrelevant to the outcome of the game in the sense that the equilibrium outputs, prices and profits of the firms are the same in all situations, and so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in the two stage game. We assume that demand functions for the goods are symmetric and linear, the marginal costs of the firms are common and constant, and the fixed costs are zero.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Oviedo University Press in its journal Economics and Business Letters.
Volume (Year): 2 (2013)
Issue (Month): 2 ()
Contact details of provider:
Postal: Avda del Cristo s/n, 33006 Oviedo
Phone: 985 10 37 45
Fax: 985 10 48 71
Web page: http://www.unioviedo.es/reunido/index.php/EBL/index
More information through EDIRC
Other versions of this item:
- Tanaka, Yasuhito, 2014. "Irrelevance of the choice of strategic variables in duopoly under relative profit maximization," MPRA Paper 55891, University Library of Munich, Germany.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kockesen, Levent & Ok, Efe A., 1997. "Negatively Interdependent Preferences," Working Papers 97-02, C.V. Starr Center for Applied Economics, New York University.
- Yasuhito Tanaka, 2013.
"Equivalance of Cournot and Bertrand equilibria in differentiated duopoly under relative profit maximization with linear demand,"
AccessEcon, vol. 33(2), pages 1479-1486.
- Tanaka, Yasuhito, 2014. "Equivalance of Cournot and Bertrand equilibria in differentiated duopoly under relative profit maximization with linear demand," MPRA Paper 55890, University Library of Munich, Germany.
- Schaffer, Mark E., 1989. "Are profit-maximisers the best survivors? : A Darwinian model of economic natural selection," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 29-45, August.
- Tanaka, Yasuhito, 2014. "Relative profit maximization and irrelevance of leadership in Stackelberg model," MPRA Paper 55887, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francisco Delgado).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.