Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103557
Authors: 
Satoh, Atsuhiro
Tanaka, Yasuhito
Year of Publication: 
2014
Citation: 
[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [Volume:] 8 [Issue:] 2014-34 [Pages:] 1-15
Abstract: 
This study derives pure strategy Bertrand equilibria in a duopoly in which two firms produce a homogeneous good with convex cost functions and seek to maximize the weighted sum of their absolute and relative profits. The study shows that there exists a range of equilibrium prices in duopolistic equilibria. This range of equilibrium prices is narrower and lower than the range of equilibrium prices in duopolistic equilibria under pure absolute profit maximization. Moreover, the larger the weight on the relative profit, the narrower and lower the range of equilibrium prices. In this sense, relative profit maximization is more aggressive than absolute profit maximization.
Subjects: 
Bertrand equilibrium
convex cost function
relative profit maximization
JEL: 
D43
L13
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article

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