Endogenous Market Structures and Welfare
AbstractI characterize microfounded endogenous market structures with Bertrand and Cournot competition and perform welfare analysis generalizing the Mankiw-Whinston condition for excess entry. The impact of market leaders on welfare is reconsidered, with a number of policy implications about strategic investments, vertical contracts, bundling, mergers and more. The neutrality of consumer surplus holds only when utility is homothetic. Under quantity competition, aggressive (accommodating) leaders increase consumer surplus if the elasticity of utility is decreasing (increasing) in consumption. This provides general rules to evaluate mergers and abuse of dominance issues in antitrust policy.
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Bibliographic InfoPaper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2012_12.
Date of creation: 2012
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Postal: Cannaregio, S. Giobbe no 873 , 30121 Venezia
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Endogenous entry; oligopoly; welfare;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-29 (All new papers)
- NEP-BEC-2012-07-29 (Business Economics)
- NEP-COM-2012-07-29 (Industrial Competition)
- NEP-IND-2012-07-29 (Industrial Organization)
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