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Looking at the Cost Side of "Monopoly."

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  • Aiginger, Karl
  • Pfaffermayr, Michael

Abstract

Welfare loss under oligopoly is defined as that part of consumer surplus which is lost and not regained by higher profits. In a model with asymmetric firms, this implies that the total welfare loss consists of the deadweight loss triangle plus a cost side inefficiency effect, due to the fact that in imperfect markets not all firms utilize the lowest cost technique. Using a flexible CV-model, the authors calculate these effects empirically for two relatively homogeneous industries (pulp/paper and cement). The deadweight loss triangles are shown to be smaller than the cost difference effect ('the staircase') for these industries. Copyright 1997 by Blackwell Publishing Ltd

Suggested Citation

  • Aiginger, Karl & Pfaffermayr, Michael, 1997. "Looking at the Cost Side of "Monopoly."," Journal of Industrial Economics, Wiley Blackwell, vol. 45(3), pages 245-267, September.
  • Handle: RePEc:bla:jindec:v:45:y:1997:i:3:p:245-67
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    Citations

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    Cited by:

    1. christoph Engel, 2005. "Voice over IP. Competition Policy and Regulation," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2005_26, Max Planck Institute for Research on Collective Goods.
    2. Manfred Neumann, 1999. "Monopoly Welfare Losses in the Long Run," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 26(1), pages 1-9, March.
    3. D. P. T. Young, 2000. "Firms' Market Power, Endogenous Preferences and the Focus of Competition Policy," Review of Political Economy, Taylor & Francis Journals, vol. 12(1), pages 73-87.
    4. Okumura, Yasunori, 2016. "Individual transferable quotas in Cournot competition," Economic Modelling, Elsevier, vol. 55(C), pages 315-321.
    5. Karl Aiginger & Michael Pfaffermayr, 1999. "Product Quality, Cost Asymmetry and the Welfare Loss of Oligopoly," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 6(2), pages 165-180.
    6. Ela Glowicka, 2005. "Bailouts in a Common Market: A Strategic Approach," CIG Working Papers SP II 2005-20, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    7. Jun Chen & Zhiqi Chen, 2011. "The quiet life of a monopolist: The efficiency losses of monopoly reconsidered," Frontiers of Economics in China, Springer;Higher Education Press, vol. 6(3), pages 389-412, September.
    8. Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
    9. Lang, Gunter & Welzel, Peter, 1999. "Mergers among German Cooperative Banks: A Panel-Based Stochastic Frontier Analysis," Small Business Economics, Springer, vol. 13(4), pages 273-286, December.
    10. Ritz, Robert, 2016. "Oligopolistic competition and welfare," Cambridge Working Papers in Economics 1680, Faculty of Economics, University of Cambridge.
    11. Aiginger, Karl & Mueller, Dennis C. & Weiss, Christoph, 1998. "Objectives, topics and methods in industrial organization during the nineties: Results from a survey," International Journal of Industrial Organization, Elsevier, vol. 16(6), pages 799-830, November.
    12. Karl Aiginger, 2008. "The Impact of Competition on Macroeconomic Performance," Chapters,in: The Economics of Corporate Governance and Mergers, chapter 14 Edward Elgar Publishing.
    13. Aiginger, K., 1998. "A framework for evaluating the dynamic competitiveness of countries," Structural Change and Economic Dynamics, Elsevier, vol. 9(2), pages 159-188, June.
    14. Nikolaus Fink, 2011. "SSNIP, state-owned enterprises, public goods and complements," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 381-388, July.

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