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Does entry improve welfare? A general equilibrium approach to competition policy

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Author Info

  • Bertrand Crettez

    ()

  • Marie-Cécile Fagart

    ()

Abstract

We consider a simple general equilibrium model with imperfect competition. Firms are price taker in the input market and compete à la Cournot in some or all of the product markets (their technology displays constant returns to scale). We show that an increase in the number of firms does not always improve welfare. We also provide a characterization in terms of mark-up rates of the sectors for which entry is welfare enhancing. Thus, this paper challenges the common idea that mergers with no cost synergy are not desirable for consumers.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00712-009-0082-y
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Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 98 (2009)
Issue (Month): 2 (November)
Pages: 97-118

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Handle: RePEc:kap:jeczfn:v:98:y:2009:i:2:p:97-118

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Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: Cournot competition; Competition policy; General equilibrium and imperfect competition; Efficiency; D50; L13; L40;

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References

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  1. Joseph F. Francois & Henrik Horn, 1998. "Competition Policy in an Open Economy," Tinbergen Institute Discussion Papers 98-092/2, Tinbergen Institute.
  2. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, October.
  3. Victor Ginsburgh & Michiel Keyzer, 1997. "The structure of applied general equilibrium models," ULB Institutional Repository 2013/1653, ULB -- Universite Libre de Bruxelles.
  4. Stephen Spear, . "The Electricity Market Game," GSIA Working Papers 2003-E17, Carnegie Mellon University, Tepper School of Business.
  5. J. Peter Neary, 2003. "Competitive versus Comparative Advantage," The World Economy, Wiley Blackwell, vol. 26(4), pages 457-470, 04.
  6. Bertrand Crettez & Marie-Cécile Fagart, 2005. "A Note on The Pareto Efficiency of General Oligopolistic Equilibria," Working Papers 2005-05, Centre de Recherche en Economie et Statistique.
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Citations

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Cited by:
  1. Illtae Ahn & Hyukseung Shin, 2012. "Domestic Welfare Effects Of The Entry Of A Foreign Firm," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(2), pages 35-57, June.
  2. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2009. "The welfare effects of entry: the role of the input market," Journal of Economics, Springer, vol. 98(3), pages 189-201, December.
  3. Marc Deschamps, 2013. "Pourquoi des politiques de concurrence ?," GREDEG Working Papers 2013-23, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.

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