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Welfare‐improving cooperation with a consumer‐friendly multiproduct corporation

Arturo García, Mariel Leal and Sang-Ho Lee ()

Managerial and Decision Economics, 2020, vol. 41, issue 7, 1144-1155

Abstract: We consider a multiproduct corporation that adopts consumer‐friendly activities and cooperates with single‐plant firms for improving welfare. We show that full cooperation is socially beneficial if products are strong complements, whereas partial cooperation with higher consumer‐friendly activities is beneficial if products are substitutes. We also examine a sequential choice game of endogenous cooperation in which the multiproduct corporation can induce (partial or full) cooperation and show that our findings are still consistent at equilibrium. We finally compare different ownership of the single‐plant firms and find that foreign ownership decreases the benefits of cooperation.

Date: 2020
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