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Effects of Integration with a Consumer-Friendly Firm in a Cournot Duopoly

Author

Listed:
  • Mariel Leal

    (Tecnologico de Monterrey)

  • Arturo García

    (Tecnologico de Monterrey)

  • Sang-Ho Lee

    (Chonnam National University)

Abstract

We study the effects of uniting two separated markets, each monopolized by a firm, into a single integrated duopoly market. When one of the firms is consumer-friendly, we examine certain conditions under which integration turns out to be beneficial or detrimental to the actors involved. We show that consumers in the local market which the consumer-friendly firm is from may have their surplus reduced unless the firm has a cost disadvantage. We also find conditions under which the welfare of one market or the other can be reduced, even that of both simultaneously. Finally, we show that (i) it would be better that the firm is friendly only with the consumers of its original market and not with those of the global market and (ii) more competition in the presence of a consumer-friendly firm might not be beneficial to the local society.

Suggested Citation

  • Mariel Leal & Arturo García & Sang-Ho Lee, 2020. "Effects of Integration with a Consumer-Friendly Firm in a Cournot Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 20(3), pages 587-604, September.
    • Handle: RePEc:kap:jincot:v:20:y:2020:i:3:d:10.1007_s10842-019-00320-5
    DOI: 10.1007/s10842-019-00320-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Integration; Consumer-friendly firm; Technical advantage; Asymmetric Cournot duopoly;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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