Throughout the remaining of the paper, we assume that Assumption 1 holds.1 Using (1) - (3), we obtain the equilibrium pr(ices and quantities) χ v − v v − v q1 = q 0 1 + 2 − β , (4)(4− 2(3β )∆ v v χ ( ) v − v ( ) )0 v − vp1 = p1 − 2− β2 + 1− β2 β , (5)(4− 3β2)∆ ( v( ) ) v 0 χ − 2 v − v − v − vq2 = q2 + 2 β β , and (6)(4− 3β2)∆ ( v v ) 0 − χ v − v − 2 v − vp2 = p2 β + 2(1 β ) , (7)(4− 3β2)∆ v v wher. [...] Therefore, ceteris paribus, the larger is the production, the higher is the size effect. [...] To see the intuition, we note that the residual demands for firms 1 and 2 are q1 = 1 − 2 (α (1− β)− p1 + βp2) and q2 = α− p2 − βq1 β 1 respectively. [...] In the first case, the absolute value of the slope is 1− 2 , and in the second1 β case, it is 1. [...] Therefore, for any β ∈ (0, 1), D(v;β) < 0 if 0 < v < d1 or d2 < v < d3 or v > d4, and D(v;β) > 0 if d1 < v < d2 or d3 < v < d4.
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