Price and non-price competition in oligopoly: An analysis of relative payoff maximizers

Arbeitspapier

Do firms under relative payoffs maximizing (RPM) behavior always choose a strategy profile that results in tougher competition compared to firms under absolute payoffs maximizing (APM) behavior? In this paper we will address this issue through a simple model of symmetric oligopoly where firms select a two dimensional strategy set of price and a non-price variable known as quality simultaneously. In conclusion, our results show that equilibrium solutions of RPM and APM are distinct. We further characterize the comparison between these two equilibrium concepts. In particular, RPM does not always lead to stricter competition compared to the Nash equilbrium (APM). In fact, the comparison between two equilibrium concepts is influenced by the parameters of demand curve and cost function. The conditions, derived in this paper, determine under which circumstances RPM induces more competition or less competition w.r.t the price or non-price dimension.

Object Details

• ISBN: 978-3-86788-664-2
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Ruhr Economic Papers ; No. 575

Classification and Topics

• Classification: Wirtschaft ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Firm Behavior: Theory ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets ; Information and Product Quality; Standardization and Compatibility
• Subject: relative payoff s maximizing (RPM) ; quality ; price ; oligopoly

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Moghadam, Hamed M.
• Event: Veröffentlichung
• (who): Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
• (where): Essen
• (when): 2015

Further information

• DOI: doi:10.4419/86788664
• Handle: http://hdl.handle.net/10419/119460
• Last update: 10.03.2025, 11:43 AM CET