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Local search markets and external competition

Author

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  • Patrick Legros
  • Konrad O. Stahl

Abstract

Increased competition tends to benefit all buyers with increasing product variety and decreasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, local surplus is better provided by local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and local surplus is better provided by local monopoly.

Suggested Citation

  • Patrick Legros & Konrad O. Stahl, 2019. "Local search markets and external competition," CESifo Working Paper Series 7683, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_7683
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    File URL: https://www.cesifo-group.de/DocDL/cesifo1_wp7683.pdf
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    References listed on IDEAS

    as
    1. Bouckaert, Jan, 2000. "Monopolistic competition with a mail order business," Economics Letters, Elsevier, vol. 66(3), pages 303-310, March.
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    5. Andrea Pozzi, 2013. "The effect of Internet distribution on brick-and-mortar sales," RAND Journal of Economics, RAND Corporation, vol. 44(3), pages 569-583, September.
    6. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
    7. repec:wly:emetrp:v:86:y:2018:i:2:p:523-557 is not listed on IDEAS
    8. Rhodes, Andrew & Zhou, Jidong, 2016. "Consumer Search and Retail Market Structure," MPRA Paper 69484, University Library of Munich, Germany.
    9. Andrew Rhodes, 2015. "Multiproduct Retailing," Review of Economic Studies, Oxford University Press, vol. 82(1), pages 360-390.
    10. Yongmin Chen & Michael H. Riordan, 2008. "PriceÔÇÉincreasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058, December.
    11. Lisa M. George, 2009. "National Television And The Market For Local Products: The Case Of Beer," Journal of Industrial Economics, Wiley Blackwell, vol. 57(1), pages 85-111, March.
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    More about this item

    Keywords

    global competition; monopoly; oligopoly; search;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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