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Market structure, scale economies and industry performance

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  • AMIR, Rabah

Abstract

We provide an extensive and general investigation of the effecst on industry performance - profits, social welfare and price-cost margins - of exogenously changing the number of firms in Cournot markets. This includes an in-depth exploration of the well-known trade-off between competition and production efficiency. Most conventional beliefs actually require some qualifications to be valid. Under scale economies, welfare is maximized by a finite number of firms. Our results shed light on several policy debates in industrial organization, including the relationship between the Herfindahl index and social welfare, destructive competition and natural monopoly. Our analytical approach combines simplicity with generality.

Suggested Citation

  • AMIR, Rabah, 2003. "Market structure, scale economies and industry performance," CORE Discussion Papers 2003065, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2003065
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    Citations

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    Cited by:

    1. Paul Belleflamme & Eric Toulemonde, 2009. "Negative Intra-Group Externalities In Two-Sided Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 245-272, February.
    2. Koski, Heli & Pajarinen, Mika, 2013. "Empirical Evaluation of the Effectiveness of Competition Policy," ETLA Working Papers 15, The Research Institute of the Finnish Economy.
    3. Amir, Rabah & Lazzati, Natalia, 2011. "Network effects, market structure and industry performance," Journal of Economic Theory, Elsevier, vol. 146(6), pages 2389-2419.
    4. Doan, Tinh & Stevens, Philip, 2012. "Evolution of competition in Vietnam industries over the recent economic transition," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-24.
    5. Sara Amoroso & Peter M. Kort & Bertrand Melenberg & Joseph Plasmans & Mark Vancauteren, 2010. "Firm Level Productivity under Imperfect Competition in Output and Labor Markets," CESifo Working Paper Series 3082, CESifo Group Munich.
    6. Manuela Mosca, 2008. "On the origins of the concept of natural monopoly: Economies of scale and competition," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 15(2), pages 317-353.
    7. M. van Leuvensteijn, 2008. "The Boone-indicator: Identifying different regimes of competition for the American Sugar Refining Company 1890-1914," Working Papers 08-37, Utrecht School of Economics.
    8. Schiersch Alexander & Schmidt-Ehmcke Jens, 2011. "Is the Boone-Indicator Applicable? – Evidence from a Combined Data Set of German Manufacturing Enterprises," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 231(3), pages 336-357, June.
    9. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Discussion Paper 2007-32, Tilburg University, Center for Economic Research.
    10. Lewis Evans and Patrick Hughes, 2003. "Competition Policy in Small Distant Open Economies: Some Lessons from the Economics Literature," Treasury Working Paper Series 03/31, New Zealand Treasury.

    More about this item

    Keywords

    Cournot oligopoly; returns to scale; entry; equilibrium comparative statics;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D60 - Microeconomics - - Welfare Economics - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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