Abstract
AbstractI consider a standard two-stage game of divisionalization in which, in the first stage, two firms choose the number of divisions and, in the second stage, divisions compete independently à la Cournot. Two important assumptions are made. The creation of a division involves a fixed cost, and all divisions sell symmetrically differentiated goods. I obtain that differentiation stimulates the creation of divisions in equilibrium. This effect is so important that prices decrease with the level of product differentiation. As far as welfare is concerned, I obtain that the equilibrium number of divisions is lower than the one that it would maximize social welfare if no intervention at the market stage is feasible.
Funder
Ministerio de Ciencia, Innovación y Universidades
Conselleria de Cultura, Educación y Ciencia, Generalitat Valenciana
Universidad de Alicante
Publisher
Springer Science and Business Media LLC
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