Sales or Profits? Managerial Decision-Making in a Duopoly With Symmetric and Asymmetric Costs

The paper examines the performance of firms when managers can choose sales or profit maximization strategies and when costs can be symmetric or asymmetric. Three competitive scenarios are examined: both firms choose profit maximization strategies, both firms choose sales maximization strategies, and one firm chooses profit and its rival chooses sales maximization. The paper uses theoretical and numerical analysis to examine a number of symmetric and asymmetric cost scenarios and identifies six different types of industry equilibrium. It confirms the well-known prisoners' dilemma behavior but demonstrates that this occurs only at relatively low levels of cost.