TITLE:
Irrelevance of Conjectural Variation in a Private Duopoly with Consistent Conjectures: The Relative Performance Approach and Network Effects
AUTHORS:
Yasuhiko Nakamura
KEYWORDS:
Relative Profit Maximization; Conjectural Variation; Consistent Conjecture; Network Effects
JOURNAL NAME:
Modern Economy,
Vol.4 No.9A,
August
20,
2013
ABSTRACT: This paper explores the equilibrium market
outcomes in the contexts of both quantity-setting and price-setting private
duopolies with the consistent conjectures of two private firms, wherein they
maximize the weighted sum of their own profits and their respective opponent
firm’s profit. Similar to the private duopoly without network effects wherein
the two private firms maximize their genuine relative profits, in the private
duopoly with network effects such that both firms maximize the weighted sum of
their own profits and their respective opponent firm’s profit, we show that the
equilibrium outcomes in the quantity-setting competition with the consistent
conjectures of both firms are equivalent to those in the price-setting
competition with the consistent conjectures of both firms.