Profit Maximization Mitigates Competition
AbstractWe consider oligopolistic markets in which the notion of shareholders' utility is well-defined and compare the Bertrand-Nash equilibria in case of utility maximization with those under the usual profit maximization hypothesis. Our main result states that profit maximization leads to less price competition than utility maximization. Since profit maximization tends to raise proces, it may be regarded as beneficial for the owners as a whole. Moreover, if profit maximization is a good proxy for utility maximization, then there is no need for a general equilibrium analysis that takes the distribution of profits among consumers fully into account and partial equilibrium analysis suffices.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 94-15.
Length: 22 pages
Date of creation: Nov 1994
Date of revision:
Publication status: Published in: Economic Theory, 1996, 7(1) pp 139-60
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Other versions of this item:
- Egbert Dierker & Birgit Grodahl, 1995. "Profit maximization mitigates competition," Economic Theory, Springer, Springer, vol. 7(1), pages 139-160.
- Dierker, Egbert & Grodal, Birgit, 1996. "Profit Maximization Mitigates Competition," Economic Theory, Springer, Springer, vol. 7(1), pages 139-60, January.
- Egbert DIERKER & Birgit GRODAL, 1994. "Profit Maximization Mitigates Competition," Vienna Economics Papers, University of Vienna, Department of Economics vie9405, University of Vienna, Department of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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- Tarun Sabarwal, 2004. "A Consistent Firm Objective When Markets are Incomplete: Profit Maximization," Econometric Society 2004 North American Summer Meetings, Econometric Society 141, Econometric Society.
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GE, Growth, Math methods, EconWPA
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- Abbas Ali & Abdulrahman Al-Aali & Abdullah Al-Owaihan, 2013. "Islamic Perspectives on Profit Maximization," Journal of Business Ethics, Springer, Springer, vol. 117(3), pages 467-475, October.
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- Ritzberger, Klaus, 2005. "Shareholder voting," Economics Letters, Elsevier, Elsevier, vol. 86(1), pages 69-72, January.
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