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

Mariel Leal (), Arturo García () and Sang-Ho Lee ()
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Mariel Leal: Tecnologico de Monterrey
Arturo García: Tecnologico de Monterrey

Journal of Industry, Competition and Trade, 2020, vol. 20, issue 3, No 6, 587-604

Abstract: 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.

Keywords: Integration; Consumer-friendly firm; Technical advantage; Asymmetric Cournot duopoly (search for similar items in EconPapers)
JEL-codes: L13 L31 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s10842-019-00320-5

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