Monopolistic Competition vs Oligopoly in the "Large Economy": How Much Is Difference?
The paper studies a market of horizontally differentiated good under increasing return to scale and exogenous number of firms. Three concepts of equilibria are compared: Cournot, Bertrand and monopolistic competition. Under fairly general assumptions on consumer's preferences, it is shown that Lerner index is the highest in Cournot case, monopolistic competition provides the lowest one and Bertrand equilibrium takes intermediate position. When the number of firms N increases, both oligopolistic equilibria converge to monopolistic competitive equilibrium with rate 1/ N . Thus the study generalizes the similar results on markets of homogeneous goods.
Volume (Year): 19 (2013)
Issue (Month): 3 ()
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References listed on IDEAS
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- Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 303-317, March.
- ZHELOBODKO, Evgeny & KOKOVIN, Sergey & PARENTI, Mathieu & THISSE, Jean - François, 2011.
"Monopolistic competition in general equilibrium: beyond the CES,"
CORE Discussion Papers
2011010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic competition in general equilibrium: Beyond the CES," PSE Working Papers halshs-00566431, HAL.
- Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic Competition in General Equilibrium: Beyond the CES," CREA Discussion Paper Series 11-03, Center for Research in Economic Analysis, University of Luxembourg.
- Evgeny Zhelobodko & Sergey Kokovin & Mathieu Parenti & Jacques-François Thisse, 2011. "Monopolistic Competition in General Equilibrium: Beyond the CES," Discussion Paper Series DP2011-16, Research Institute for Economics & Business Administration, Kobe University.
- Novshek, William & Chowdhury, Prabal Roy, 2003. "Bertrand equilibria with entry: limit results," International Journal of Industrial Organization, Elsevier, vol. 21(6), pages 795-808, June.
- William Novshek, 1980. "Cournot Equilibrium with Free Entry," Review of Economic Studies, Oxford University Press, vol. 47(3), pages 473-486.
- R. J. Ruffin, 1971. "Cournot Oligopoly and Competitive Behaviour," Review of Economic Studies, Oxford University Press, vol. 38(4), pages 493-502.
- Koji Okuguchi, 1973. "Quasi-Competitiveness and Cournot Oligopoly," Review of Economic Studies, Oxford University Press, vol. 40(1), pages 145-148. Full references (including those not matched with items on IDEAS)
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