A small firm leads to curious outcomes: Social surplus, consumer surplus, and R&D activities

Toshihiro Matsumura and Noriaki Matsushima

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: This paper investigates an asymmetric duopoly model with a Hotelling line. We find that helping a small (minor) firm can reduce both social and consumer surplus. This makes a sharp contrast to existing works showing that helping minor firms can reduce social surplus but always improves consumer surplus. We also investigate R&D competition. We find that a minor firm may engage in R&D more intensively than a major firm in spite of economies of scale in R&D activities.

Date: 2009-06
New Economics Papers: this item is included in nep-com, nep-ino, nep-mic and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0742

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