Effects of globalizing a consumer-friendly firm into an asymmetric mixed duopoly

Leal, Mariel and Garcia, Arturo and Lee, Sang-Ho (2017): Effects of globalizing a consumer-friendly firm into an asymmetric mixed duopoly.

Abstract

We study the effects of uniting two separated markets, each monopolized by a producer, into a single globalized duopoly market. When one of the firms is consumer-friendly before and after globalization, we examine certain conditions under which globalization turns out to be beneficial. Consumers in the local market which the consumer-friendly firm is from may have their surplus reduced under certain conditions. We also find conditions under which welfare of one market or the other can be reduced, even that of both simultaneously. If these conditions were met, it would be better, in a globalizing context, that the firm is friendly only with the consumers of its original market and not with those of the global market.

• Item Type: MPRA Paper
• Language: English
• Keywords: globalization, consumer-friendly firm, technical advantage, asymmetric mixed duopoly
• Subjects: F - International Economics > F6 - Economic Impacts of Globalization > F61 - Microeconomic Impacts; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L12 - Monopoly ; Monopolization Strategies; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise > L31 - Nonprofit Institutions ; NGOs ; Social Entrepreneurship

References

Amir, R., Jin, J. Y. and Tröge, M. (2017) Free trade versus autarky under asymmetric cournot oligopoly. Review of International Economics, 25, 98–107.

Bárcena-Ruiz, J. C. and Garzón, M. B. n. (2005) International trade and strategic privatization. Review of Development Economics, 9, 502–513.

Cato, S. and Matsumura, T. (2015) Optimal privatisation and trade policies with endogenous market structure. Economic Record, 91, 309–323.

Chang, Y.-M., Chen, H.-Y., Wang, L. F. S. and Wu, S.-J. (2014) Corporate social responsibility and international competition: A welfare analysis. Review of International Economics, 22, 625–638.

Cho, S. and Lee, S. (2017) Subsidization policy on the social enterprise for the underprivileged. Korean Economic Review, 33, 153–178.

Cordella, T. (1993) Trade liberalization and oligopolistic industries: A welfare appraisal. Recherches Économiques de Louvain / Louvain Economic Review, 59, 355–363.

Cremer, H., Marchand, M. and Thisse, J.-F. (1991) Mixed oligopoly with differentiated products. International Journal of Industrial Organization, 9, 43–53.

Dadpay, A. and Heywood, J. S. (2006) Mixed oligopoly in a single international market*. Australian Economic Papers, 45, 269–280.

De Fraja, G. and Delbono, F. (1989) Alternative strategies of a public enterprise in oligopoly. Oxford Economic Papers, 41, 302–311.

Dong, B. and Yuan, L. (2010) The loss from trade under international cournot oligopoly with cost asymmetry. Review of International Economics, 18, 818–831.

Flores, D. and García, A. (2016) On the output and welfare effects of a non-profit firm in a mixed duopoly: A generalization. Economic Systems, 40, 631 – 637.

Goering, G. (2007) The strategic use of managerial incentives in a non-profit firm mixed duopoly. Managerial and Decision Economics, 28, 83–91.

Harris, R. and Wiens, E. (1980) Government enterprise: An instrument for the internal regulation of industry. Canadian Journal of Economics, 13, 125–132.

Kameda, H. and Ui, T. (2012) Effects of symmetry on globalizing separated monopolies to a nash-cournot oligopoly. International Game Theory Review, 14, 1.

Königstein, M. and Müller,W. (2001)Why firms should care for customers. Economics Letters, 72, 47–52.

Kopel, M. (2015) Price and quantity contracts in a mixed duopoly with a socially concerned firm. Managerial and Decision Economics, 36, 559–566.

Kopel, M. and Brand, B. (2012) Socially responsible firms and endogenous choice of strategic incentives. Economic Modelling, 29, 982 – 989.

Kopel, M., Lamantia, F. and Szidarovszky, F. (2014) Evolutionary competition in a mixed market with socially concerned firms. Journal of Economic Dynamics and Control, 48, 394 – 409.

Lambertini, L. and Tampieri, A. (2015) Incentives, performance and desirability of socially responsible firms in a cournot oligopoly. Economic Modelling, 50, 40 – 48.

Lee, S.-H. and Hwang, H.-S. (2003) Partial ownership for the public firm and competition. Japanese Economic Review, 54, 324–335.

Lee, S.-H., Xu, L. and Chen, Z. (2013) Competitive privatization and tariff policies in an international mixed duopoly. The Manchester School, 81, 763–779.

Liu, C.-C., Wang, L. and Lee, S.-H. (2015) Strategic environmental corporate social responsibility in a differentiated duopoly market. Economics Letters, 129, 108–111.

Markusen, J. R. (1981) Trade and the gains from trade with imperfect competition. Journal of International Economics, 11, 531 –551.

Matsumura, T. (1998) Partial privatization in mixed duopoly. Journal of Public Economics, 70, 473–483.

Matsumura, T. and Ogawa, A. (2014) Corporate social responsibility or payoff asymmetry? a study of an endogenous timing game. Southern Economic Journal, 81, 457–473

Matsumura, T. and Ogawa, A. (2016) Corporate social responsibility and endogenous competition structure. Economics Bulletin, 36, 2117–2127.

Nakamura, Y. (2014) Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm. International Review of Economics and Finance, 34, 105–117.

Porter, M. E. and Kramer, M. R. (2006) Strategy & society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84, 78 – 92.

Wang, L. F. andWang, J. (2009) Environmental taxes in a differentiated mixed duopoly. Economic Systems, 33, 389 – 396.

Wang, L. F. S., Wang, Y.-C. and Zhao, L. (2012) Tariff policy and welfare in an international duopoly with consumer-friendly initiative. Bulletin of Economic Research, 64, 56–64