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Welfare in differentiated oligopolies with more than two firms

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  • Schmidt, Robert C.

Abstract

Excessive differentiation in the quality or location dimension in order to soften price competition is a well-established conclusion concerning duopolistic markets. This has inspired authors to discuss policy measures that may improve welfare in a differentiated market. In the present paper, a general welfare analysis is conducted for a varying number of firms. It is shown that outcomes are almost optimal when three or more competitors are in the market. In light of this, a laissez-faire policy should be adopted. For a range of entry costs, market outcomes entail insufficient entry. Therefore, a subsidy to entry may improve welfare.

Suggested Citation

  • Schmidt, Robert C., 2009. "Welfare in differentiated oligopolies with more than two firms," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 501-507, July.
    • Handle: RePEc:eee:indorg:v:27:y:2009:i:4:p:501-507
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    References listed on IDEAS

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    Cited by:

    1. Xavier Y Wauthy, 2010. "Market coverage and the nature of product differentiation: a note," Economics Bulletin, AccessEcon, vol. 30(2), pages 1129-1136.
    2. repec:kap:enreec:v:68:y:2017:i:2:d:10.1007_s10640-016-0024-4 is not listed on IDEAS
    3. Donald J. Wright, 2013. "An Equilibrium Model of General Practitioner Payment Schemes," The Economic Record, The Economic Society of Australia, vol. 89(286), pages 287-299, September.
    4. Petal Jean Hackett, 2012. "Cutting too Close? Design Protection and Innovation in Fashion Goods," CESifo Working Paper Series 3716, CESifo Group Munich.

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