Relative profit maximization and Bertrand equilibrium with convex cost functions

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Discussion Papers ; No. 2014-7

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets
• Subject: Bertrand equilibrium ; convex cost function ; relative profit maximization

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Satoh, Atsuhiro ; Tanaka, Yasuhito
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/92416
• Last update: 10.03.2025, 11:44 AM CET