Irrelevance of the choice of strategic variables in duopoly under relative profit maximization
We 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.
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
References listed on IDEAS
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.:
- Efe A. Ok & Levent KoÚkesen, 2000.
"Negatively interdependent preferences,"
Social Choice and Welfare,
Springer;The Society for Social Choice and Welfare, vol. 17(3), pages 533-558.
- 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.
- Toshihiro Matsumura & Noriaki Matsushima & Susumu Cato, 2009. "Relative Performance and R&D Competition," ISER Discussion Paper 0752, Institute of Social and Economic Research, Osaka University.
When requesting a correction, please mention this item's handle: RePEc:ove:journl:aid:9904. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francisco J. 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.