IDEAS home Printed from https://ideas.repec.org/p/tse/wpaper/131904.html

A Contribution Margin Approach to Imperfect Competition

Author

Listed:
  • Bontems, Philippe

Abstract

This paper studies symmetric oligopoly when marginal cost is not constant. In this environment, the Lerner index is not a sufficient measure of profitability: firms’ relevant margin is the contribution margin, defined relative to variable cost. The paper introduces a contribution margin index and relates it to the Lerner index through a profitability factor. This factor captures the wedge between local markups and average profitability. It also governs comparative statics for cost pass-through, market expansion, entry, profits, and concentration. The framework nests the constant marginal cost benchmark and shows how cost curvature changes the interpretation of standard oligopoly statistics.

Suggested Citation

  • Bontems, Philippe, 2026. "A Contribution Margin Approach to Imperfect Competition," TSE Working Papers 26-1759, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:131904
    as

    Download full text from publisher

    File URL: https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2026/wp_tse_1759.pdf
    File Function: Full Text
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:131904. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/tsetofr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.