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Competition enhancings measures and scope economies: a welfare appraisal

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Abstract

This paper examines welfare changes before the introduction of more competition in technologically related markets. We develop a simple two-market duopoly with product differentiation where a multi-product firm competes with a different single-product firm in each market. Two competition enhancing measures are considered, divestiture of the multi-product firm and entry of single-product firms in one of the markets. The results obtained indicate that more competition may lead to a welfare reduction. Our analysis points out the relevance of the type and size of economies of scope, the particular way of introducing more competition and the degree of product differentiation.

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File URL: ftp://ftp.fundacionsepi.es/InvEcon/paperArchive/January2003/v27i1a4.pdf
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Bibliographic Info

Article provided by Fundación SEPI in its journal Investigaciones Economicas.

Volume (Year): 27 (2003)
Issue (Month): 1 (January)
Pages: 97-123

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Handle: RePEc:iec:inveco:v:27:y:2003:i:1:p:97-123

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Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
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Related research

Keywords: Cost complementarity/substitutability; fixed cost subadditivity; welfare;

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Cited by:
  1. Maria Jose Gil-Molto & Joanna Poyago-Theotoky, 2006. "Flexible vs Dedicated Technology Adoption in the Presence of a Public Firm," Discussion Paper Series 2006_1, Department of Economics, Loughborough University, revised Jan 2006.
  2. Cesaltina Pacheco Pires & Margarida Catalão-Lopes, 2012. "Scope economies, entry deterrence and welfare," CEFAGE-UE Working Papers 2012_11, University of Evora, CEFAGE-UE (Portugal).

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