Does entry improve welfare? A general equilibrium approach to competition policy
AbstractWe 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.
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Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2008-14.
Length: 26 pages
Date of creation: 2008
Date of revision:
Cournot competition; competition policy; general equilibrium and imperfect competition; effciency;
Other versions of this item:
- Bertrand Crettez & Marie-Cécile Fagart, 2009. "Does entry improve welfare? A general equilibrium approach to competition policy," Journal of Economics, Springer, vol. 98(2), pages 97-118, November.
- Bertrand Crettez & Marie-Cécile Fagart, 2005. "Does Entry Improve Welfare ? A General Equilibrium Approach of Competition Policy," Working Papers 2005-08, Centre de Recherche en Economie et Statistique.
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-17 (All new papers)
- NEP-BEC-2008-05-17 (Business Economics)
- NEP-COM-2008-05-17 (Industrial Competition)
- NEP-MIC-2008-05-17 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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