Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92416
Authors: 
Satoh, Atsuhiro
Tanaka, Yasuhito
Year of Publication: 
2014
Series/Report no.: 
Economics Discussion Papers 2014-7
Abstract: 
The authors study pure strategy Bertrand equilibria in a duopoly in which two firms produce a homogeneous good with convex cost functions, and they seek to maximize the weighted sum of their absolute and relative profits. They show that there exists a range of the equilibrium price in duopolistic equilibria. This range of the equilibrium price is narrower and lower than the range of the equilibrium price in duopolistic equilibria under pure absolute profit maximization, and the larger the weight on the relative profit, the narrower and lower the range of the equilibrium price. 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
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Working Paper

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