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Quantity Competition, Endogenous Motives and Behavioral Heterogeneity

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  • Chirco, Alessandra
  • Colombo, Caterina
  • Scrimitore, Marcella

Abstract

The paper shows that strategic quantity competition can be characterized by behavioral heterogeneity, once competing firms are allowed in a pre-market stage to optimally choose the behavioral rule they will follow in their strategic choice of quantities. In particular, partitions of the population of identical firms in profit maximizers and relative profit maximizers turn out to be deviation-proof equilibria, both in simultaneous and sequential game structures. Our findings that in a strategic framework heterogeneous behavioral rules are consistent with individual incentives provides a game-theoretic microfoundation of heterogeneity.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24165.

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Date of creation: Jul 2010
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Handle: RePEc:pra:mprapa:24165

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Keywords: Behavioral Heterogeneity; Endogenous Motives; Relative Performance; Multistage Games; Quantity Competition.;

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