Public regulatory intervention in consumer-friendly firms

Vitor Miguel Ribeiro ()
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Vitor Miguel Ribeiro: Vitor Miguel Ribeiro - FEP - Vitor Miguel de Sousa Ribeiro

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We study a duopoly with differentiated and substitutable goods composed of one consumer-friendly firm and one pure-profit maximizing firm. In such a duopoly, a regulatory authority intervenes to control the degree of altruism of the consumer-friendly firm. We conclude that under quantity competition, if firms sell goods that are too homogeneous the policymaker should impose a ceiling on the level of benevolence of the consumer-friendly firm. However, under price competition, the policymaker never imposes a ceiling on the level of kindness of the consumer-friendly firm. Our results also show that, whatever the degree of product differentiation, the social welfare under price competition is always higher than the social welfare under quantity competition, which restores the arguments pointed out by the traditional literature and constitutes a sharp contrast with Nakamura (2013).

Keywords: Consumer-Friendly Firm; Product Differentiation; Public Intervention (search for similar items in EconPapers)
JEL-codes: D43 L11 L13 R12 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2014-11
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mic and nep-mkt
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Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:548

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