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Divisionalization In Markets With Hetergeneous Goods

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  • Miguel González-Maestre

    (Universidad Autónoma de Barcelona)

Abstract

This paper assumes that firms can create independent divisions which compete in a market where the product is spatially differentiated. Our first result is that if the number of firms is exogenous and higher than some critical level, then Perfect Competition is the only Subgarne Perfect EquiLibrium. On the other hand, if we assume free entry and a fixed cost per firm, depending on the relationship between fixed costs and the degree of product differentiation, the equilibrium outcome may be monopoly, oligopoly or monopol istic competition. Moreover, if the fixed cost is sufficientty small, the number of independent sellers will be Lower than in the standard modelwhere divisionaliization is not possible.

Suggested Citation

  • Miguel González-Maestre, 1993. "Divisionalization In Markets With Hetergeneous Goods," Working Papers. Serie AD 1993-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:1993-12
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1993-12.pdf
    File Function: Fisrt version / Primera version, 1993
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    References listed on IDEAS

    as
    1. Nikolai S. Kukushkin, 1993. "Cournot Oligopoly With "Almost" Identical Convex Costs," Working Papers. Serie AD 1993-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Marius Schwartz & Earl A. Thompson, 1986. "Divisionalization and Entry Deterrence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 307-321.
    3. Luis Corchón & Simon Wilkie, 1990. "Doubly implementing the ratio correspondence with a "natural" mechanism," Working Papers. Serie AD 1990-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Herrero, Carmen & Villar, Antonio, 1991. "Vector mappings with diagonal images," Mathematical Social Sciences, Elsevier, vol. 22(1), pages 57-67, August.
    5. Mirman, Leonard J & Samuelson, Larry & Urbano, Amparo, 1993. "Monopoly Experimentation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 549-563, August.
    6. Corchon, Luis C., 1991. "Oligopolistic competition among groups," Economics Letters, Elsevier, vol. 36(1), pages 1-3, May.
    7. Corchon, Luis C. & Gonzalez-Maestre, Miguel, 2000. "On the competitive effects of divisionalization," Mathematical Social Sciences, Elsevier, vol. 39(1), pages 71-79, January.
    8. Marhuenda, F, 1995. "Distribution of Income and Aggregation of Demand," Econometrica, Econometric Society, vol. 63(3), pages 647-666, May.
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