Monopolisation and Industry Structure
AbstractThe aim of this paper is to provide empirically testable predictions regarding the relationship between market size and concentration. In a model of endogenous horizontal mergers, it is shown that concentrated outcomes cannot be supported in a free entry equilibrium in large exogenous sunk cost industries: the upper bound to concentration tends to zero as market size (relative to setup costs) tends to infinity. In contrast, arbitrarily concentrated outcomes may be sustained in endogenous sunk costs industries, no matter how large the market, and even in the absence of mergers; that is, the upper bound to concentrated does not decrease with market size. Using an equilibrium concept defined in the space of observable outcomes, it is shown that these predictions to not depend on the details of the extensive form of the game, even allowing for side payments between firms and endogenous product choice. The results complement those of Sutton (1991) on the stability of fragmented outcomes.
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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2000-W27.
Date of creation: 01 Oct 2000
Date of revision:
Horizontal Mergers; Monopolization; Industry Concentration;
Other versions of this item:
- Volker Nocke, 2000. "Monopolisation and Industry Structure," Econometric Society World Congress 2000 Contributed Papers 0429, Econometric Society.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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.:
- Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July.
- Compte, Olivier & Jenny, François & Rey, Patrick, 2002.
"Capacity Constraints, Mergers and Collusion,"
Open Access publications from University of Toulouse 1 Capitole
http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
- Bresnahan, Timothy F & Reiss, Peter C, 1990. "Entry in Monopoly Markets," Review of Economic Studies, Wiley Blackwell, vol. 57(4), pages 531-53, October.
- Kamien, Morton I & Zang, Israel, 1993. "Monopolization by Sequential Acquisition," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 205-29, October.
- Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, vol. 57(3), pages 533-57, May.
- Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, vol. 60(4), pages 889-917, July.
- Neary, J Peter, 2002.
"Foreign Competition and Wage Inequality,"
Review of International Economics,
Wiley Blackwell, vol. 10(4), pages 680-93, November.
- Volker Nocke & Stephen Yeaple, 2004. "Mergers and the Composition of International Commerce," NBER Working Papers 10405, National Bureau of Economic Research, Inc.
- Volker Nocke, 2003.
"A Gap for Me: Entrepreneurs and Entry,"
PIER Working Paper Archive
03-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Vasconcelos, Helder, 2006. "Endogenous mergers in endogenous sunk cost industries," International Journal of Industrial Organization, Elsevier, vol. 24(2), pages 227-250, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.