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Is competition in the transport industry bad?A welfare analysis of R&D with inter-regional transportation

Kazuhiro Takauchi and Tomomichi Mizuno
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Tomomichi Mizuno: Graduate School of Economics, Kobe University

No 1910, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: We consider the welfare effects of a higher number of carriers in a two-region reciprocal market model. While exporting firms engage in cost-reducing R&D and use transport services to export their products to the foreign market, carriers haul the exporting firms’ products and compete in a Bertrand fashion in the inter-regional transport market. We demonstrate that if the degree of R&D spill over is large, an increase in the number of carriers harms consumers and social welfare. We further examine the case in which the exporting firm has monopsony power in the transportation service, and also reveal that if the spillover rate is sufficiently high, a higher number of carriers reduces consumer and social surplus. Hence, policies to restrict competition in the transport industry may be socially desirable.

New Economics Papers: this item is included in nep-com, nep-reg, nep-tre and nep-ure
Date: 2019-07
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