TY - JOUR

T1 - Price and non-price competition in an oligopoly

T2 - an analysis of relative payoff maximizers

AU - Markazi Moghadam, Hamed

N1 - Funding Information: The author is grateful to Wolfgang Leininger, Lars Metzger, Marc Escrihuela Villar, and all conference participants at the University of Macedonia, Corvinus University of Budapest, SING11, the European Meeting on Game Theory in St. Petersburg, the China Meeting of the Econometric Society in Wuhan, and XXXII Jornadas de Economia Industrial for helpful comments and suggestions. I particularly thank an anonymous referee whose suggestions made invaluable contributions to my revisions. Financial support from TU Dortmund University and Ruhr Graduate School in Economics is gratefully acknowledged.

PY - 2020/4

Y1 - 2020/4

N2 - Do firms that engage in relative payoff maximizing (RPM) behavior always choose a strategy profile that results in tougher competition compared to firms that engage in absolute payoff maximizing (APM) behavior? We address this question by way of a simple model of symmetric oligopoly where firms simultaneously select a two-dimensional strategy set consisting of a price variable and a non-price (i.e., quality) variable. Our results show that equilibrium solutions of RPM and APM are distinct. It is further shown that the standard result of Nash equilibrium in oligopoly, namely, that the non-price variable is used to soften price competition, survives also when firms are concerned with relative payoff considerations.

AB - Do firms that engage in relative payoff maximizing (RPM) behavior always choose a strategy profile that results in tougher competition compared to firms that engage in absolute payoff maximizing (APM) behavior? We address this question by way of a simple model of symmetric oligopoly where firms simultaneously select a two-dimensional strategy set consisting of a price variable and a non-price (i.e., quality) variable. Our results show that equilibrium solutions of RPM and APM are distinct. It is further shown that the standard result of Nash equilibrium in oligopoly, namely, that the non-price variable is used to soften price competition, survives also when firms are concerned with relative payoff considerations.

KW - Finite population evolutionary stable strategy (FPESS)

KW - Oligopoly

KW - Quality

KW - Relative payoff maximizing (RPM)

UR - http://www.scopus.com/inward/record.url?scp=85076879712&partnerID=8YFLogxK

U2 - 10.1007/s00191-019-00653-8

DO - 10.1007/s00191-019-00653-8

M3 - Article

AN - SCOPUS:85076879712

VL - 30

SP - 507

EP - 521

JO - Journal of Evolutionary Economics

JF - Journal of Evolutionary Economics

SN - 0936-9937

IS - 2

ER -