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The Effects of Entry when Monopolistic Competition and Oligopoly Coexist

Author

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  • Fujiwara Kenji

    (School of Economics, Kwansei Gakuin University, Uegahara 1-1-155, Nishinomiya, Hyogo 662-8501, Japan)

Abstract

This paper proposes a model of a continuum of industries in which some industries are monopolistically competitive, the others are oligopolistic, and they interact in a labor market. We use this model to examine the effects of entry of oligopolistic firms. We show that this raises the equilibrium wage and induces exit of monopolistically competitive firms. Then, we find that the profits of each oligopolistic firm and the whole oligopolistic industry decrease. Finally, we establish that if the elasticity of substitution is the same in all industries, welfare improves as a result of an increase in the oligopolistic firms.

Suggested Citation

  • Fujiwara Kenji, 2020. "The Effects of Entry when Monopolistic Competition and Oligopoly Coexist," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(2), pages 1-11, June.
    • Handle: RePEc:bpj:bejtec:v:20:y:2020:i:2:p:11:n:1
    DOI: 10.1515/bejte-2017-0161
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    References listed on IDEAS

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    More about this item

    Keywords

    monopolistic competition; oligopoly; general equilibrium; entry; welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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