On the output and welfare effects of a non-profit firm in a mixed duopoly: A generalization

- We study the output and welfare effects of a non-profit firm in a mixed duopoly.
- We consider general demand and cost functions.
- Technical efficiency determines whether social concern increases or reduces welfare.
- We introduce the concept of technical advantage in production.
- Social concern eventually reduces welfare if firms have quadratic cost functions.

We study the output and welfare impacts of a non-profit firm in a mixed duopoly. In particular, we show that technical efficiency at the margin is crucial to determine whether the social responsibility of the non-profit firm increases or reduces welfare, assuming general demand and cost functions. This implies the paradoxical result that more social responsibility may reduce welfare. In addition, we introduce the concept of technical advantage in production and apply it to the study of a mixed duopoly considering convex-quadratic cost functions. Interestingly, a firm may have a technical advantage in production and at the same time be technically less efficient than its rival at the margin. We show that the paradox eventually occurs as the non-profit firm exhibits more social responsibility if firms have quadratic cost functions. This can happen even if the non-profit firm has a substantial technical advantage over its rival.