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Monopolistic Competition vs Oligopoly in the "Large Economy": How Much Is Difference?

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Author Info

  • Zhelobodko, E.

    (NRU-HSE, Moscow, Russia
    IM SB RAS, Novosibirsk, Russia
    NSU, Novosibirsk, Russia)

  • Sidorov, A.

    (NRU-HSE, Moscow, Russia
    IM SB RAS, Novosibirsk, Russia
    NSU, Novosibirsk, Russia)

  • Thisse, J.-F.

    (NRU-Higher School of Economics, Moscow, Russia Author-Workplace-Name: CORE Universite catholique de Louvain, Belgium)

Abstract

The paper studies a market of horizontally differentiated good under increasing return to scale and exogenous number of firms. Three concepts of equilibria are compared: Cournot, Bertrand and monopolistic competition. Under fairly general assumptions on consumer's preferences, it is shown that Lerner index is the highest in Cournot case, monopolistic competition provides the lowest one and Bertrand equilibrium takes intermediate position. When the number of firms N increases, both oligopolistic equilibria converge to monopolistic competitive equilibrium with rate 1/ N . Thus the study generalizes the similar results on markets of homogeneous goods.

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Bibliographic Info

Article provided by New Economic Association in its journal Journal of the New Economic Association.

Volume (Year): 19 (2013)
Issue (Month): 3 ()
Pages: 10-26

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Handle: RePEc:nea:journl:y:2013:i:19:p:10-26

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Related research

Keywords: monopolistic competition; oligopoly; differentiated goods; market power; Lerner index;

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  1. Novshek, William, 1980. "Cournot Equilibrium with Free Entry," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 473-86, April.
  2. Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 303-317, March.
  3. Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic competition in general equilibrium: Beyond the CES," PSE Working Papers halshs-00566431, HAL.
  4. Okuguchi, Koji, 1973. "Quasi-Competitiveness and Cournot Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 40(1), pages 145-48, January.
  5. Novshek, William & Chowdhury, Prabal Roy, 2003. "Bertrand equilibria with entry: limit results," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 795-808, June.
  6. Ruffin, R J, 1971. "Cournot Oligopoly and Competitive Behaviour," Review of Economic Studies, Wiley Blackwell, vol. 38(116), pages 493-502, October.
  7. repec:hal:wpaper:halshs-00566431 is not listed on IDEAS
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