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Hawks and Doves in Segmented Markets: Profit Maximization with Varying Competitive Aggressiveness
Claude d'Aspremont, Rodolphe Dos Santos Ferreira and Jacques Thépot
Annals of Economics and Statistics
No. 121/122 (June 2016), pp. 45-66
Stable URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.121-122.45
Page Count: 22
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We consider a duopoly, each firm supplying a captive and a contested segment. Starting from two extreme formulations of the profit maximization objective, we introduce a parameterized class of managerial objective functions, involving price-quantity pairs as strategic variables but corresponding to different managerial attitudes. By specifying the parameters of competitive aggressiveness, we recover classical competition regimes. The model is extended to analyze the strategic choice of managerial aggressiveness, and to examine the implications of changes in the intensity of competition. In order to endogenize the competitive aggressiveness parameters, a more primitive price-quantity model introduces the possibility of consumer price discounting. JEL: D43, L13, L21. / KEY WORDS: Competitive Aggressiveness, Segmented Markets, Competition Regimes, Delegation, Consumer Price Discounting.
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