Firm size distortions under duopoly

Abstract: Motivated by the fact that some regulations involve extra costs for those firms at a size beyond a critical threshold, this paper contributes to the analysis of the welfare distortions due to these regulations. In the context of a duopoly, our results show that social welfare is not monoto...

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Autores principales: González-Maestre,Miguel, Peñarrubia,Diego
Lenguaje:English
Publicado: Universidad de Chile. Departamento de Economía 2017
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Acceso en línea:http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862017000200157
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spelling oai:scielo:S0718-528620170002001572017-12-26Firm size distortions under duopolyGonzález-Maestre,MiguelPeñarrubia,Diego Duopoly welfare firm size strategic effects. Abstract: Motivated by the fact that some regulations involve extra costs for those firms at a size beyond a critical threshold, this paper contributes to the analysis of the welfare distortions due to these regulations. In the context of a duopoly, our results show that social welfare is not monotonic with the regulatory threshold. In particular, we obtain the paradoxical result that a policy decision of increasing the threshold might involve a dramatic decrease in welfare in some markets. An interesting consequence of this result is that the positive discrimination towards small firms is a rather subtle issue. Our results suggest that the relevant regulatory thresholds should differ across industries. Apparently, this is taken into account in some countries (e.g., USA), but not in many other countries.info:eu-repo/semantics/openAccessUniversidad de Chile. Departamento de EconomíaEstudios de economía v.44 n.2 20172017-12-01text/htmlhttp://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862017000200157en10.4067/S0718-52862017000200157
institution Scielo Chile
collection Scielo Chile
language English
topic Duopoly
welfare
firm size
strategic effects.
spellingShingle Duopoly
welfare
firm size
strategic effects.
González-Maestre,Miguel
Peñarrubia,Diego
Firm size distortions under duopoly
description Abstract: Motivated by the fact that some regulations involve extra costs for those firms at a size beyond a critical threshold, this paper contributes to the analysis of the welfare distortions due to these regulations. In the context of a duopoly, our results show that social welfare is not monotonic with the regulatory threshold. In particular, we obtain the paradoxical result that a policy decision of increasing the threshold might involve a dramatic decrease in welfare in some markets. An interesting consequence of this result is that the positive discrimination towards small firms is a rather subtle issue. Our results suggest that the relevant regulatory thresholds should differ across industries. Apparently, this is taken into account in some countries (e.g., USA), but not in many other countries.
author González-Maestre,Miguel
Peñarrubia,Diego
author_facet González-Maestre,Miguel
Peñarrubia,Diego
author_sort González-Maestre,Miguel
title Firm size distortions under duopoly
title_short Firm size distortions under duopoly
title_full Firm size distortions under duopoly
title_fullStr Firm size distortions under duopoly
title_full_unstemmed Firm size distortions under duopoly
title_sort firm size distortions under duopoly
publisher Universidad de Chile. Departamento de Economía
publishDate 2017
url http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0718-52862017000200157
work_keys_str_mv AT gonzalezmaestremiguel firmsizedistortionsunderduopoly
AT penarrubiadiego firmsizedistortionsunderduopoly
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