Welfare-improving cooperation with a consumer-friendly multiproduct corporation

Garcia, Arturo and Leal, Mariel and Lee, Sang-Ho (2020): Welfare-improving cooperation with a consumer-friendly multiproduct corporation.

Abstract

This paper considers a multiproduct corporation that adopts consumer-friendly activities and cooperates with single plant firms for improving welfare. Comparing competition and (full or partial) cooperation, we show that full cooperation is socially beneficial if products are strong complements, whereas partial cooperation with a 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 cooperation and show that our findings are supportive at equilibrium. We finally compare different ownerships of the single plant firms and find that foreign ownership decreases the benefits of cooperation. Therefore, a cooperation with multiproduct corporation should be accompanied with active governmental guideline for promoting consumer friendly activities.

• Item Type: MPRA Paper
• Language: English
• Keywords: consumer-friendly activities; full cooperation; partial cooperation; multiproduct corporation; welfare-improving cooperation
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm; L - Industrial Organization > L4 - Antitrust Issues and Policies > L44 - Antitrust Policy and Public Enterprises, Nonprofit Institutions, and Professional Organizations

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