Relative Profit Maximization in Duopoly: Difference or Ratio

Atsuhiro Satoh () and Yasuhito Tanaka

International Journal of Business and Economics, 2014, vol. 13, issue 2, 127-141

Abstract: We compare two formulations of relative profit maximization in duopoly with differentiated goods: (1) (difference case) maximization of the difference between the profit of one firm and that of the other firm and (2) (ratio case) maximization of the ratio of the profit of one firm to the total profit. We show that in asymmetric duopoly the equilibrium output of the more efficient (lower cost) firm in the ratio case is larger than that in the difference case and the price of the good of the more efficient firm in the ratio case is lower than that in the difference case. For the less efficient (higher cost) firm we obtain the converse results.

Keywords: duopoly; relative profit maximization; difference; ratio (search for similar items in EconPapers)
JEL-codes: D43 L13 L21 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Relative profit maximization in duopoly: difference or ratio (2015)
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