Satoh, Atsuhiro and Tanaka, Yasuhito (2014): Choice of strategic variables under relative profit maximization in asymmetric oligopoly: nonequivalence of price strategy and quantity strategy. Published in: Economics and Business Letters
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Abstract
We consider a simple model of the choice of strategic variables under relative profit maximization by firms in an asymmetric oligopoly with differentiated substitutable goods such that there are three firms, Firm 1, 2 and 3, demand functions are linear and symmetric, marginal costs are constant, there is no fixed cost, Firm 2 and 3 have the same cost function, but Firm 1 has a different cost function. In such a model we show that there are two pure strategy subgame perfect equilibria. One is such that all firms choose the outputs as their strategic variables, and the other is such that Firm 2 and 3 choose the outputs as their strategic variables, and Firm 1 chooses the price as its strategic variable.
Item Type:  MPRA Paper 

Original Title:  Choice of strategic variables under relative profit maximization in asymmetric oligopoly: nonequivalence of price strategy and quantity strategy 
Language:  English 
Keywords:  relative profit maximization; asymmetric oligopoly; choice of strategic variables 
Subjects:  D  Microeconomics > D4  Market Structure, Pricing, and Design > D43  Oligopoly and Other Forms of Market Imperfection 
Item ID:  59071 
Depositing User:  Yasuhito Tanaka 
Date Deposited:  04 Oct 2014 00:59 
Last Modified:  10 Oct 2019 13:07 
References:  Gibbons, R and K. J. Murphy (1990), ``Relative performance evaluation for chief executive officers'', Industrial and Labor Relations Review, 43, 30S51S. Lu, Y. (2011), ``The relativeprofitmaximization objective of private firms and endogenous timing in a mixed oligopoly'', The Singapore Economic Review, 56, 203213. Matsumura, T., N. Matsushima and S. Cato (2013) ``Competitiveness and R\&D competition revisited'' Economic Modeling, 31, 541547. Miller, N. H. and A. I. Pazgal ``The equivalence of price and quantity competition with delegation'', Rand Journal of Economics, 32, 284301. VegaRedondo, F. (1997) ``The evolution of Walrasian behavior'' Econometrica 65, 375384. Schaffer, M.E. (1989) ``Are profit maximizers the best survivors?'' Journal of Economic Behavior and Organization 12, 295. Tanaka, Y. (2013) ``Irrelevance of the choice of strategic variables in duopoly under relative profit maximization'', Economics and Business Letters, 2, pp. 7583, 2013. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/59071 
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Choice of strategic variables under relative profit maximization in asymmetric oligopoly. (deposited 13 May 2014 09:23)
 Choice of strategic variables under relative profit maximization in asymmetric oligopoly: nonequivalence of price strategy and quantity strategy. (deposited 04 Oct 2014 00:59) [Currently Displayed]