Relative profit maximization and Bertrand equilibrium with quadratic cost functions
We study the Bertrand equilibrium in duopoly in which two firms produce a homogeneous good under quadratic cost functions, and they seek to maximize the weighted sum of their absolute and relative profits. We show that there exists a range of the equilibrium prices in duopolistic equilibria. This range of equilibrium prices is narrower and lower than the range of the equilibrium prices in duopolistic equilibria under pure absolute profit maximization, and the larger the weight on the relative profit, the narrower and lower the range of the equilibrium prices. In this sense relative profit maximization is more aggressive than absolute profit maximization.
Volume (Year): 2 (2013)
Issue (Month): 3 ()
|Contact details of provider:|| Postal: Avda del Cristo s/n, 33006 Oviedo|
Phone: 985 10 37 45
Fax: 985 10 48 71
Web page: https://www.unioviedo.es/reunido/index.php/EBL/index
More information through EDIRC
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.:
- Dastidar, Krishnendu Ghosh, 1995. "On the Existence of Pure Strategy Bertrand Equilibrium," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 19-32, January.
- Yasuhito Tanaka, 2013.
"Irrelevance of the choice of strategic variables in duopoly under relative profit maximization,"
Economics and Business Letters,
Oviedo University Press, vol. 2(2), pages 75-83.
- Tanaka, Yasuhito, 2014. "Irrelevance of the choice of strategic variables in duopoly under relative profit maximization," MPRA Paper 55891, University Library of Munich, Germany.
- 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.
- Kockesen, Levent & Ok, Efe A., 1997. "Negatively Interdependent Preferences," Working Papers 97-02, C.V. Starr Center for Applied Economics, New York University.
- 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.
- Matsumura, Toshihiro & Matsushima, Noriaki & Cato, Susumu, 2013. "Competitiveness and R&D competition revisited," Economic Modelling, Elsevier, vol. 31(C), pages 541-547. Full references (including those not matched with items on IDEAS)