Tuesday, June 12, 2018
Leal, Mariel ; Garcia, Arturo and Lee, Sang-Ho explore the 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.