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Hawks and Doves in Segmented Markets: Profit Maximization with Varying Competitive Aggressiveness

Author

Listed:
  • Claude d'Aspremont
  • Rodolphe Dos Santos Ferreira
  • Jacques Thépot

Abstract

We consider a duopoly, each firm supplying a captive and a contested segment. Starting from two extreme formulations of the profit maximization objective, we introduce a parameterized class of managerial objective functions, involving price-quantity pairs as strategic variables but corresponding to different managerial attitudes. By specifying the parameters of competitive aggressiveness, we recover classical competition regimes. The model is extended to analyze the strategic choice of managerial aggressiveness, and to examine the implications of changes in the intensity of competition. In order to endogenize the competitive aggressiveness parameters, a more primitive price-quantity model introduces the possibility of consumer price discounting.

Suggested Citation

  • Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Jacques Thépot, 2016. "Hawks and Doves in Segmented Markets: Profit Maximization with Varying Competitive Aggressiveness," Annals of Economics and Statistics, GENES, issue 121-122, pages 45-66.
  • Handle: RePEc:adr:anecst:y:2016:i:121-122:p:45-66
    DOI: 10.15609/annaeconstat2009.121-122.45
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    File URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.121-122.45
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    Keywords

    Competitive Aggressiveness; Segmented Markets; Competition Regimes; Delegation; Consumer Price Discounting.;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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