Relative profit maximization in asymmetric oligopoly

Satoh, Atsuhiro and Tanaka, Yasuhito (2014): Relative profit maximization in asymmetric oligopoly. Published in: Economics Bulletin , Vol. 34, No. 3 (27 July 2014): pp. 1653-1664.

Abstract

We analyze Bertrand and Cournot equilibria in an asymmetric oligopoly in which the firms produce differentiated substitutable goods and seek to maximize their relative profits instead of their absolute profits. Assuming linear demand functions and constant marginal costs we show the following results. If the marginal cost of a firm is lower (higher) than the average marginal cost over the industry, its output at the Bertrand equilibrium is larger (smaller) than that at the Cournot equilibrium, and the price of its good at the Bertrand equilibrium is lower (higher) than that at the Cournot equilibrium.

• Item Type: MPRA Paper
• Language: English
• Keywords: relative profit maximization, asymmetric oligopoly, Cournot and Bertrand equilibria
• 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

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