Satoh, Atsuhiro and Tanaka, Yasuhito (2015): Relative profit maximization and the choice of strategic variables in duopoly. Forthcoming in: Keio Economic Studies

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Abstract
We study implications of the choice of strategic variables, price or quantity, by firms in a duopoly with differentiated goods in which each firm maximizes its relative profit. We consider general demand and cost functions, and show that the choice of strategic variables is irrelevant in the sense that the conditions of relative profit maximization for the firms are the same in all situations, and so any combination of strategy choice by the firms constitutes a subgame perfect equilibrium in 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 define the relative profit of a firm as the ratio of its profit over the total profit. But, even if we define the relative profit of a firm as the difference between the profits of firms, we can show the same result.
Item Type:  MPRA Paper 

Original Title:  Relative profit maximization and the choice of strategic variables in duopoly 
Language:  English 
Keywords:  relative profit maximization, choice of strategic variables, duopoly 
Subjects:  D  Microeconomics > D4  Market Structure, Pricing, and Design > D43  Oligopoly and Other Forms of Market Imperfection L  Industrial Organization > L1  Market Structure, Firm Strategy, and Market Performance > L13  Oligopoly and Other Imperfect Markets 
Item ID:  63000 
Depositing User:  Yasuhito Tanaka 
Date Deposited:  21. Mar 2015 06:14 
Last Modified:  21. Mar 2015 07:09 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/63000 