Industrial organization with profit rate maximizing firms

Abstract

We study the impact on industrial organization of the switching of objective function, from pure profit to profit rate maximization. The output level of firm is lower at optimum. This lead to a new conception of efficiency. Cases of no coordination are considered. In perfect competition, price signal disappears; factors remain paid at their marginal productivity, but modified. In imperfect competition, reaction functions may vanish even if collusion remains possible; limit of oligopoly remains perfect competition of profit rate; the paradox of Bertrand may remain; a new concept is studied: mixed duopoly, where firms can choose and change their objective.