In the place of NAS limitations, auditor 2 additionally the associate bring NAS on prices while they participate in undifferentiated Bertrand race
Lemma step 1 implies that, absent NAS constraints, the fresh NAS business does not get in touch with the brand new audit sector.18 18 Remember that launching has actually modeled in other places, such as for example freedom dangers or knowledge spillovers, manage break which versatility. In fact, undifferentiated Bertrand battle regarding the NAS industry means auditor 2 never brings in NAS rents as opposed to NAS restrictions.
- (i) In the event that , next auditor dos offers auditing features to buyer organizations and you can , and you may auditor step one sells auditing attributes so you can consumer corporation . Auditor 2 decides audit top quality and you will set review costs .
- (ii) Otherwise, if , after that auditor dos carries auditing characteristics so you can consumer company and auditor 1 deal auditing qualities to buyer providers and . Auditor dos chooses audit quality and sets audit charges .
Auditor 2 face a good tradeoff ranging from offering auditing properties just to you to visitors business during the a higher price, and offering auditing services so you can one or two buyer companies at the a lesser price. (more…)