Choice of strategic variables under relative profit maximization in asymmetric oligopoly: non-equivalence of price strategy and quantity strategy

Atsuhiro Satoh () and Yasuhito Tanaka

Economics and Business Letters, 2014, vol. 3, issue 2, 115-126

Abstract: We consider choice of strategic variables under relative profit maximization in an asymmetric oligopoly with differentiated goods such that there are three firms, Firm 2 and 3 have the same cost function, but Firm 1 has a different cost function. We show that there are two pure strategy sub-game perfect equilibria. 1) All firms choose the outputs as their strategic variables, 2)Firm 2 and 3 choose the outputs as their strategic variables, and Firm 1 chooses the price as its strategic variable.

Date: 2014
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