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Competition among the big and the small

  • SHIMOMURA, Ken-Ichi

    ()

    (RIEB, Kobe University)

  • THISSE, Jacques-François

    ()

    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Many industries are made of a few big firms, which are able to manipulate the market outcome, and of a host of small businesses, each of which has a negligible impact on the market. We provide a general equilibrium framework that encapsulates both market structures. Due to the higher toughness of competition, the entry of big firms leads them to sell more through a market expansion effect generated by the shrinking of the monopolistically competitive fringe. Furthermore, social welfare increases with the number of big firms because the pro-competitive effect associated with entry dominates the resulting decrease in product diversity.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2012009.

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Date of creation: 08 Mar 2012
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Handle: RePEc:cor:louvco:2012009
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  7. d'ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe & GERARD-VARET, Louis-André, . "Unemployment in an extended Cournot oligopoly model," CORE Discussion Papers RP -843, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Wennekers, Sander & van Stel, Andr� & Carree, Martin & Thurik, Roy, 2010. "The Relationship between Entrepreneurship and Economic Development: Is It U-Shaped?," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 6(3), pages 167-237, July.
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  11. Emek Basker, 2007. "The Causes and Consequences of Wal-Mart's Growth," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 177-198, Summer.
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