How Many Firms Should Be Leaders? Beneficial Concentration Revisited
AbstractWe investigate the relationship between the Herfindahl-Hirschman Index (HHI) and welfare. First, we discuss the model wherein m leaders and N - m followers compete. Daughety (1990) finds that under linear demand and constant marginal cost, the Stackelberg model yields larger welfare and HHI than the Cournot model. Thus, he demonstrates that beneficial concentration occurs. We find that this always occurs under general cost and demand functions when m is sufficiently large, but does not always occur when m is small. Next, we consider the free entry of followers, and find that beneficial concentration always occurs regardless of m. In particular, the more persistent the leadership, the more likely it is to be beneficial.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 48.
Length: 37 pages
Date of creation: Oct 2009
Date of revision: Oct 2009
Contact details of provider:
Postal: 1-155 Uegahara Ichiban-cho, Nishinomiya, Hyogo 662-8501
Web page: http://www-econ.kwansei.ac.jp/~econ/index_e.html
More information through EDIRC
HHI; beneficial concentration; leadership; free entry market;
Other versions of this item:
- Hiroaki Ino & Toshihiro Matsumura, 2012. "How Many Firms Should Be Leaders? Beneficial Concentration Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1323-1340, November.
- 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:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
- Scrimitore, Marcella, 2010.
"Managerial Incentives and Stackelberg Equilibria in Oligopoly,"
24245, University Library of Munich, Germany.
- Marcella Scrimitore, 2010. "Managerial Incentives and Stackelberg Equilibria in Oligopoly," EERI Research Paper Series EERI_RP_2010_39, Economics and Econometrics Research Institute (EERI), Brussels.
- Federico Etro, 2014. "Some thoughts on the Sutton approach," Journal of Economics, Springer, vol. 112(2), pages 99-113, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toshihiro Okada).
If references are entirely missing, you can add them using this form.