David vs. Goliath
This paper develops a model where monopolistically competitive and oligopolistic firms coexist.The model is characterized by a monopolistically competitive fringe and a few multi-product firmswhich decide to be large or not at equilibrium. Conditions are derived for the coexistence of bothtypes of firms: heterogeneity in production efficiency, captured by economies of scope for large firms,appears as a necessary condition for them to coexist at equilibrium. The entry of a large firm raises theaverage price decreasing thereby consumer surplus despite an increase in the total number of varieties.An application to international trade is considered.
|Date of creation:||Dec 2015|
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- Ken-Ichi Shimomura & Jacques-François Thisse, 2012.
"Competition among the big and the small,"
RAND Journal of Economics,
RAND Corporation, vol. 43(2), pages 329-347, 06.
- SHIMOMURA, Ken-Ichi & THISSE, Jacques-François, 2009. "Competition among the big and the small," CORE Discussion Papers 2009047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- SHIMOMURA, Ken-Ichi & THISSE, Jacques-François, 2012. "Competition among the big and the small," CORE Discussion Papers 2012009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ken-Ichi Shimomura & Jacques-François Thisse, 2012. "Competition Among the Big and the Small," Discussion Paper Series DP2012-03, Research Institute for Economics & Business Administration, Kobe University.
- Ken-Ichi Shimomura & Jacques-François Thisse, 2009. "Competition Among the Big and the Small," CREA Discussion Paper Series 09-18, Center for Research in Economic Analysis, University of Luxembourg.
- Shimomura, Ken-Ichi & Thisse, Jacques-François, 2009. "Competition Among the Big and the Small," CEPR Discussion Papers 7404, C.E.P.R. Discussion Papers.
- Yang, Xiaokai & Heijdra, Ben J, 1993. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, vol. 83(1), pages 295-301, March.
- Gene M. Grossman & Esteban Rossi-Hansberg, 2010. "External Economies and International Trade Redux," The Quarterly Journal of Economics, Oxford University Press, vol. 125(2), pages 829-858.
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