When cost improvements harm consumers
AbstractThis paper demonstrates that in a vertical structure, improving cost efficiency might sometimes be detrimental to consumers, by increasing market price. This is in stark contrast to the standard result in oligopoly theory which suggests that the surplus generated by any efficiency gain in production is shared between firms and final consumers, depending on the degree of market power. These results are applied in contexts such as international trade, diffusion of knowledge and techniques, and government intervention through income support programs.
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Bibliographic InfoPaper provided by LEEA (air transport economics laboratory), ENAC (french national civil aviation school) in its series Economics Working Papers with number 03.
Length: 21 pages
Date of creation: 24 Mar 2006
Date of revision:
Note: Type of Document - pdf; pages: 21.
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More information through EDIRC
oligopsonists; retail; vertical structure; cost pass-through.;
Other versions of this item:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-01 (All new papers)
- NEP-BEC-2006-04-01 (Business Economics)
- NEP-COM-2006-04-01 (Industrial Competition)
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.:
- Stephen F. Hamilton & David L. Sunding, 1997. "The Effect of Farm Supply Shifts on Concentration and Market Power in the Food Processing Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 524-531.
- Barros, Pedro Pita & Brito, Duarte & de Lucena, Diogo, 2006. "Mergers in the food retailing sector: An empirical investigation," European Economic Review, Elsevier, vol. 50(2), pages 447-468, February.
- Salinger, Michael A, 1988. "Vertical Mergers and Market Foreclosure," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 345-56, May.
- Sexton, Richard J. & Lavoie, Nathalie, 2001. "Food processing and distribution: An industrial organization approach," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 15, pages 863-932 Elsevier.
- Stennek, Johan & Verboven, Frank, 2001. "Merger Control and Enterprise Competitiveness - Empirical Analysis and Policy Recommendations," Working Paper Series 556, Research Institute of Industrial Economics.
- Stephen F. Hamilton & David Sunding, 1998. "Returns to Public Investments in Agriculture with Imperfect Downstream Competition," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 830-838.
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