From Walrasian Oligopolies to Natural Monopoly: an Evolutionary Model of Market Structure
AbstractWe study a market for a homogeneous good in which firms adjust their production decisions on the basis of imitation, learning from own experience, and local experimentation. For any fixed set of firms (more than one), long run behaviour settles on a symmetric marginal-cost pricing equilibrium. When market entry and exit are allowed, we find a sharp effect of technology on long-run market structure. Specifically, we show that, under decreasing returns and some fixed cost, the market grows to "full capacity" at Walrasian equilibrium; on the other hand, if returns are increasing, the unique long run outcome involves a profit-maximising monopolist.
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Bibliographic InfoPaper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 9805.
Date of creation: Oct 1998
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Evolution; mutation; imitation; oligopoly;
Other versions of this item:
- Ana B. Ania & Carlos Alós Ferrer & Fernando Vega Redondo, 1997. "From Walrasian oligopolies to natural monopolyan: An evolutionary model of market structure," Working Papers. Serie AD 1997-24, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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