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Efficiency and surplus bounds in Cournot competition

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  • Anderson, Simon P.
  • Renault, Regis

Abstract

We derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under Cournot competition. To do so, we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of ½-concavity and ½-convexity. The ”more concave” is demand, the larger the share of producer surplus in overall surplus, the smaller is consumer surplus relative to producer surplus, and the lower the ratio of deadweight loss to producer surplus. Deadweight loss over total potential surplus is at …rst increasing with demand concavity, then eventually decreasing. The analysis is extended to asymmetric …rm costs.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 113 (2003)
Issue (Month): 2 (December)
Pages: 253-264

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Handle: RePEc:eee:jetheo:v:113:y:2003:i:2:p:253-264

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Web page: http://www.elsevier.com/locate/inca/622869

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  1. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Social Choice: A Mean Voter Theorem," Discussion Papers 1989_31, Columbia University, Department of Economics.
  2. Anderson, S.P. & de Palma, A. & Kreider, B., 1999. "Tax incidece in Differentiated product Oligopoly," Papers 99-10, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  3. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 157-78, June Cita.
  4. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  6. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  7. Novshek, William., 1984. "On the Existence of Cournot Equilibrium," Working Papers 517, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Cowling, Keith & Mueller, Dennis C, 1978. "The Social Costs of Monopoly Power," Economic Journal, Royal Economic Society, vol. 88(352), pages 727-48, December.
  9. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
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Citations

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Cited by:
  1. Andrew F. Newman & Patrick Legros, 2011. "Incomplete Contracts and Industrial Organization: A Survey," Boston University - Department of Economics - Working Papers Series WP2011-036, Boston University - Department of Economics.
  2. Tatiana Damjanovic & David Ulph, 2009. "Tax Progressivity, Income Distribution and Tax Non-Compliance," Working Papers 0928, Oxford University Centre for Business Taxation.
  3. Luis C. Corchon, 2006. "Welfare losses under cournot competition," Economics Working Papers we063910, Universidad Carlos III, Departamento de Economía.
  4. Robert Ritz, 2013. "On welfare losses due to imperfect competition," Cambridge Working Papers in Economics 1334, Faculty of Economics, University of Cambridge.
  5. Tomohiro Ara & Arghya Ghosh, 2012. "Bargaining, Tariffs and Vertical Specialization," Discussion Papers 2012-14, School of Economics, The University of New South Wales.
  6. Anderson, Simon P & Renault, Régis, 2005. "Advertising Content," CEPR Discussion Papers 5064, C.E.P.R. Discussion Papers.
  7. Arghya Ghosh & Alberto Motta, 2011. "Outsourcing with Heterogeneous Firms," Discussion Papers 2011-09, School of Economics, The University of New South Wales.
  8. Ritz, R.A., 2012. "On welfare losses due to imperfect competition," Cambridge Working Papers in Economics 1234, Faculty of Economics, University of Cambridge.
  9. Luis C. Corchon & Galina Zudenkova, 2008. "Computing welfare losses from data under imperfect competition with heterogeneous goods," Economics Working Papers we082616, Universidad Carlos III, Departamento de Economía.
  10. Luis Corchón & Félix Marcos, 2010. "Price regulation in oligopoly," Economics Working Papers we100101, Universidad Carlos III, Departamento de Economía.
  11. Mares, Vlad & Swinkels, Jeroen M., 2011. "Near-optimality of second price mechanisms in a class of asymmetric auctions," Games and Economic Behavior, Elsevier, vol. 72(1), pages 218-241, May.
  12. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528 - 583.
  13. Fevrier, Philippe & Linnemer, Laurent, 2004. "Idiosyncratic shocks in an asymmetric Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 835-848, June.

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