Dynamic investigations in a duopoly game with price competition based on relative profit and profit maximization (Q2332765)

Based on 33 references written over the past 10 years, the authors start their introduction with an interesting overview of the dynamics of nonlinear duopoly games (competition between two firms) with a focus on Cournot and Bertrand games as well as mixed ones. The point of the paper is, that the authors construct discrete dynamic systems (two equations) for their Bertrand duopoly games, and -- applying local and global methods as known for dynamic systems -- get remarkable stability results for the considered games. Chapter two gives for the two firms their profit functions (which are to maximize), suitable parameters, a strictly concave utility function and conditions for relative profit maximization. Assuming a certain rational behavior of the firms the authors get a discrete dynamic system which has a unique equilibrium point \( e = (\overline{p_1}, \overline{p_2})\) depending on the introduced parameters (and the prices \(p_i\)). They prove conditions, so that \(e\) is locally asymptotically stable and discuss (based on eigen values of the Jacobian of the dynamical system) instability (losing the stability by flip bifurcation). In Chapter 3.1 one finds using local methods calculated regions of stability together with different impressive pictures, f. i. bifurcation diagram of the prices on varying parameters and maximum Lyapunov exponents. Chapter 3.2 contains global analysis for the future evolution of the dynamic behavior, so one finds by suitable parameter variations calculations together with informative pictures f. i. to basins of attraction of stable period cycles or a scenario where the system becomes chaotic. Chapter 4 deals with problems as above but with a slightly changed dynamic system (both firms update their productions based on the change occurred in the their profits) and the existence of an (locally asymptotically stable) equilibrium is shown. Then similar results as above are proved and again impressive pictures and discussions in connection with for instance a unique chaotic attractor around the stable equilibrium point or corridor stability or fractal dimension of a strange attractor or Kaplan-Yourke fractal dimension or Lyapunov exponents follow. A small Chapter 5 compares the new results with former ones and shows with help of four figures the profit and the relative profit discussed in the games of the current paper.