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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. 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.
    2. 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.
    3. Segendorff, Björn, 1995. "The Telecommunication Market: A Survey of Theory and Empirics," Working Paper Series 442, Research Institute of Industrial Economics.
    4. Dominique Peeters & Jacques Thisse & Isabelle Thomas, 1998. "Transportation networks and the location of human activities," ERSA conference papers ersa98p268, European Regional Science Association.
    5. Melatos, Mark & Woodland, Alan, 2007. "Endogenous trade bloc formation in an asymmetric world," European Economic Review, Elsevier, vol. 51(4), pages 901-924, May.
    6. Gabrielle Demange, 2017. "The stability of group formation," Revue d'économie politique, Dalloz, vol. 127(4), pages 495-516.

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