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Sustainable oligopolies

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  • Demange, Gabrielle
  • Henriet, Dominique

Abstract

In this paper, we show that an oligopoly market where both increasing returns to scale and competition are present can nevertheless satisfy stability conditions. In a sustainable oligopoly (1) each consumer chooses the firm which proposes the price-quality schedule he prefers (2) firms earn non-negative profits (3) no new firm could attract consumers and make profits. We prove that such a sustainable oligopoly exists under rather weak assumptions. The results apply to most models of vertical or horizontal product differentiation or to models of quality differentiation due to congestion effects.
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Suggested Citation

  • Demange, Gabrielle & Henriet, Dominique, 1991. "Sustainable oligopolies," Journal of Economic Theory, Elsevier, vol. 54(2), pages 417-428, August.
    • Handle: RePEc:eee:jetheo:v:54:y:1991:i:2:p:417-428
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    Cited by:

    1. Andrea Robbett, 2015. "Voting with hands and feet: the requirements for optimal group formation," Experimental Economics, Springer;Economic Science Association, vol. 18(3), pages 522-541, September.
    2. Melatos, Mark & Woodland, Alan, 2007. "Endogenous trade bloc formation in an asymmetric world," European Economic Review, Elsevier, vol. 51(4), pages 901-924, May.
    3. Jean J. Gabszewicz & Jacques-François Thisse, 2000. "Microeconomic theories of imperfect competition," Cahiers d'Économie Politique, Programme National Persée, vol. 37(1), pages 47-99.
    4. Segendorff, Björn, 1995. "The Telecommunication Market: A Survey of Theory and Empirics," Working Paper Series 442, Research Institute of Industrial Economics.
    5. Staab, Manuel, 2019. "The Formation of Social Groups under Status Concern," MPRA Paper 97114, University Library of Munich, Germany.
    6. Gabrielle Demange, 2017. "The stability of group formation," Revue d'économie politique, Dalloz, vol. 127(4), pages 495-516.
    7. Dominique Peeters & Jacques Thisse & Isabelle Thomas, 1998. "Transportation networks and the location of human activities," ERSA conference papers ersa98p268, European Regional Science Association.

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