Choice of strategic variables by relative profit maximizing firms in oligopoly

Atsuhiro Satoh () and Yasuhito Tanaka

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the choice of strategic variables by firms in a symmetric oligopoly in which each firm produces differentiated goods and maximizes its relative profit that is the difference between its profit and the average profit of the other firms. We consider a two stage game such that in the first stage the firms choose their strategic variables, quantity or price, and in the second stage they determine the values of their strategic variables. We show that the choice of strategic variables is irrelevant in the sense that the equilibrium quantities and prices are the same in all firms whichever each firm chooses in the first stage, so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in the two stage game.

Keywords: relative profit maximization; oligopoly (search for similar items in EconPapers)
JEL-codes: D43 (search for similar items in EconPapers)
Date: 2016-01-01
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Choice of Strategic Variables by Relative Profit Maximizing Firms in Oligopoly (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:71053

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