TITLE:
The Retailers’ Choices of Profit Strategies in a Cournot Duopoly: Relative Profit and Pure Profit
AUTHORS:
Feifei Zheng
KEYWORDS:
Relative Profit, Pure Profit, Cournot Competition, Nash Equilibrium
JOURNAL NAME:
Modern Economy,
Vol.8 No.2,
February
20,
2017
ABSTRACT: To investigate the influence of the relative performance
on retailers’ choices of profit strategies, a Cournot competition model composed
of two private retailers is proposed, in which retailers are facing the problem
of choosing a strategy from pure profit and relative profit. The study shows that,
1) when its competitor pursues relative profit, the retailer will adopt pure profit
strategy if the degree of relative performance of its competitor is high enough.
Otherwise, the retailer will adopt the relative profit strategy. 2) The more relative
profit-maximizing retailers there are, the more intense market competition will
be, the lower market price will decrease. 3)Under a certain degree
of relative performance, the strategy profiles (relative profit, relative profit),
(relative profit, pure profit) and (pure profit, relative profit) are all likely
to be Nash equilibrium, except the strategy profile (pure profit, pure profit).