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Local Search Markets and External Competition

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  • Patrick Legros
  • Konrad 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 Stahl, 2019. "Local Search Markets and External Competition," Working Papers ECARES 2019-13, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/287006
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    References listed on IDEAS

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    More about this item

    Keywords

    Global competition; Monopoly; Oligopoly; Search;
    All these keywords.

    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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