A biased firm in a market with complementary products. A note on the welfare effects. (14th November 2019)

• Record Type: Journal Article
• Authors: Buchen, Clemens; Palermo, Alberto
• Is Part Of: Scottish journal of political economy. Volume 67:Number 4(2020)
• Page Start: 448
• Page End: 453
• Publication Date: 2019-11-14
• Subjects: Bias -- complementary products -- oligopoly; Great Britain -- Economic conditions -- 1945-1964 -- Periodicals; Great Britain -- Economic conditions -- 1964-1979 -- Periodicals; Great Britain -- Economic conditions -- 1979-1997 -- Periodicals; 330.9411005
• DOI: 10.1111/sjpe.12236
• Languages: English
• ISSNs: 0036-9292

Abstract

Abstract: We analyse a duopoly setting with complementary products, in which a firm has a bias about its absolute advantage. We show that the bias can internalize parts of the negative externality that the complementarity of goods creates implying a higher producer's surplus. Moreover, we analyse additional conditions, which lead to an increase in the consumer's surplus. Counterintuitively, we show that the presence of a bias can lead to a positive welfare effect.