Quantity Competition and Price Competition with a Duopoly in a Consumer-Friendly Firm: A Welfare Analysis


This paper conducts a welfare analysis in a duopoly with differentiated and substitutable goods composed of one consumer-friendly firm and one absolute profit maximizing firm. We suppose that the consumer-friendly firm maximizes the weighted sum of its absolute profit and consumer surplus. In such a duopoly, when the degree of product differentiation is sufficiently high and the weight that the consumer-friendly firm puts on consumer surplus in its objective function is sufficiently high, the equilibrium social welfare is larger in the quantity competition than in the price competition, which implies that the result is reverse of that obtained in the standard duopoly with substitutable goods composed of absolute profit maximizing firms.

Share and Cite:

Y. Nakamura, "Quantity Competition and Price Competition with a Duopoly in a Consumer-Friendly Firm: A Welfare Analysis," Modern Economy, Vol. 4 No. 11, 2013, pp. 776-782. doi: 10.4236/me.2013.411082.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] P. Auger, P. Burke, T. M. Devinney and J. J. Louviere, “What Will Consumers Pay for Social Product Features?” Journal of Business Ethics, Vol. 42, No. 3, 2003, pp. 281-304.
[2] R. Trudel and J. Cotte, “Does It Pay to Be Good?” Sloan Management Review, Vol. 50, No. 2, 2009, pp. 61-68.
[3] A. McWilliams, D. Siegel and P. M. Wright, “Guest Editors Introduction—Corporate Social Responsibility: Strategic Implications,” Journal of Management Studies, Vol. 43, No. 1, 2006, pp. 1-18.
[4] S. Brammer and A. Millington, “Does It Pay to Be Different? An Analysis of the Relationship between Corporate Social and Financial Performance,” Strategic Management Journal, Vol. 29, No. 12, 2008, pp. 1325-1343.
[5] A. B. Carroll and K. M. Shabana, “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice,” International Journal of Management Reviews, Vol. 12, No. 1, 2010, pp. 85-105.
[6] P. C. Godfrey, C. B. Merrill and J. M. Hansen, “The Relationship between Corporate Social Responsibility and Shareholder Value: An Empirical Test of the Risk Management Hypothesis,” Strategic Management Journal, Vol. 30, No. 4, 2009, pp. 425-445.
[7] A. J. Hillman and G. D. Keim, “Shareholder Value, Stakeholder Management, and Social Issues: What’s the Bottom Line?” Strategic Management Journal, Vol. 22, No. 2, 2001, pp. 125-139.
[8] J. Surroca, J. A. Tribo and S. Waddock, “Corporate Responsibility and Financial Performance: The Role of Intangible Resources,” Strategic Management Journal, Vol. 31, No. 5, 2010, pp. 463-490.
[9] M. Kopel and B. Brand, “Socially Responsible Firms and Endogenous Choice of Strategic Incentives,” Economic Modelling, Vol. 29, No. 3, 2012, pp. 982-989.
[10] T. Besley and M. Ghatak, “Retailing Public Goods: The Economics of Corporate Social Responsibility,” Journal of Public Economics, Vol. 91, No. 9, 2010, pp. 1645-1663.
[11] L. Lambertini and A. Tampieri, “Corporate Social Responsibility in a Mixed Oligopoly,” University of Bologna, Bologna, 2010.
[12] N. Singh and X. Vives, “Price and Quantity Competition in a Differentiated Duopoly,” RAND Journal of Economics, Vol. 15, No. 4, 1984, pp. 546-554.
[13] G. E. Goering, “The Strategic Use of Managerial Incentives in a Non-Profit Firm Mixed Duopoly,” Managerial and Decision Economics, Vol. 28, No. 2, 2007, pp. 83-91.
[14] G. E. Goering, “Welfare Impacts of a Non-Profit Firm in Mixed Commercial Markets,” Economic Systems, Vol. 32, No. 2, 2008, pp. 326-334.
[15] G. E. Goering, “Socially Concerned Firms and the Provision of Durable Goods,” Economic Modelling, Vol. 25, No. 3, 2008, pp. 575-583.
[16] C. Fershtman and K. Judd, “Equilibrium Incentives in Oligopoly,” American Economic Review, Vol. 77, No. 5, 1987, pp. 927-940.
[17] S. D. Sklivas, “The Strategic Choice of Management Incentives,” RAND Journal of Economics, Vol. 18, No. 3, 1987, pp. 452-458. http://dx.doi.org/10.2307/2555609
[18] J. Vickers, “Delegation and the Theory of the Firm,” Economic Journal, Vol. 95, Supplement: Conference Papers, 1985, pp. 138-147.

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.