However text message, we suppose having convenience one to auditor dos has only one to opponent about NAS sector

Within extension, we studies the impact out-of extra race regarding the NAS business to the link between NAS limits and you will auditor 2’s audit top quality. To have brevity, we really do not make passion reviews and focus on impression away from NAS restrictions into the auditor 2’s audit top quality.

To start, assume that there are two NAS competition regarding NAS market: agent step 1 and agent dos. When there is undifferentiated Bertrand battle, NAS charges are no matter what NAS limits. Because of this, rather than distinction about NAS market, there’s absolutely no interaction within review markets and also the NAS sector. We thus present NAS industry differentiation in 2 different methods. Basic, we think that both auditor 2 and you may consultant dos features a aggressive virtue in the NAS business (alternatively, one consultant step one has actually a competitive drawback). 2nd, i believe that simply auditor 2 possess a competitive virtue in the newest NAS business. Like in the latest standard model, i assume that the new NAS value is not very large so you can eliminate the scenario in which visitors organizations prefer auditors so you’re able to save on NAS costs (see the inequalities inside (An effective.20) and you will (An effective.21) regarding evidences from Offer 5 and Proposal six).

cuatro.2.step one Aggressive Virtue to possess Auditor dos and you will an enthusiastic NAS Competition

I believe that the value of NAS having customer corporation try if the NAS are provided because of the agent 1, while NAS are given of the agent dos otherwise auditor 2, having trapping quality distinction regarding the NAS business. If not, the worth of NAS to possess client enterprise try , additionally the property value NAS getting customer corporation is regardless of NAS seller. As opposed to NAS constraints so you’re able to review readers, there is Bertrand race throughout the NAS markets, which implies one . As the ahead of, the introduction of a ban to your selling NAS so you can review customers affects auditor 2’s audit quality selection.

Proposition 5. If there’s two NAS competition, and one another auditor 2 and you single men dating website Houston may consultant dos have a competitive virtue from the NAS marketplace for helping visitors , NAS restrictions so you can review readers disappear auditor 2’s review quality, .

If the one another auditor dos and you can representative 2 features a competitive advantage about NAS market but there is no NAS limitation, the 3 NAS organization was engaged in Bertrand battle from the NAS industry and you may auditor 2 produces no NAS lease. To the contrary, having NAS limits to help you audit readers, the 2 NAS competitors participate into the audit readers. When the agent 2’s competitive virtue, , try good enough essential and auditor dos carries auditing services to help you readers and you may , there is distinction on the NAS field therefore the two specialists charges confident costs into the audit readers. However, in the event the auditor 2 deal auditing services so you can client organization just, there’s Bertrand race without NAS seller produces NAS rents. Consequently, auditor dos has actually bonuses to lessen review high quality market auditing services to help you client providers and when discover NAS limits in order to review clients because this allows auditor dos to make NAS rents away from asking so you’re able to consumer firm .

4.2.dos Competitive Advantage for Auditor dos

We now assume that the value of NAS provided by auditor dos to possess customer corporation was , whereas the value of NAS provided with associate step 1 otherwise consultant 2 to possess consumer organization are , in which . And that, auditor 2 enjoys an aggressive virtue on NAS sector.

Rather than NAS limitations in order to review website subscribers, auditor 2 offers NAS to all or any around three buyer enterprises at a great percentage out of . That have NAS limitations to help you audit subscribers, when the auditor 2 simply sells review attributes to help you visitors , following auditor dos sells NAS to consumer firms as well as an effective percentage out-of . If not, if auditor 2 offers audit properties in order to each other customers and you will , next auditor 2 sells NAS to help you visitors organization in the a charge out-of . Because of this, NAS restrictions to audit website subscribers will get boost review top quality while the auditor 2’s NAS book are big whenever auditor dos deal review functions only to buyer organization . It result is summarized in the adopting the proposition.