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The road less travelled : oligopoly and competition policy in general equilibrium

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  • J. Peter Neary

Abstract

I review previous approaches to modelling oligopoly in general equilibrium, and propose a new view which in principle overcomes their deficiencies: modelling firms as large in their own market but small in the economy as a whole. Implementing this approach requires a tractable specification of preferences. Dixit-Stiglitz preferences (which imply iso-elastic perceived demand functions) could be used, but "continuum-quadratic" preferences (which imply linear perceived demand functions) are more convenient. To illustrate their usefulness, I construct a simple closed-economy model of oligopoly in general equilibrium and derive some surprising implications for competition policy.

Suggested Citation

  • J. Peter Neary, 2002. "The road less travelled : oligopoly and competition policy in general equilibrium," Working Papers 200222, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:200222
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    File URL: http://hdl.handle.net/10197/1259
    File Function: First version, 2002
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    Cited by:

    1. Azar, José, 2017. "Portfolio Diversification, Market Power, and the Theory of the Firm," IESE Research Papers D/1170, IESE Business School.
    2. J. Peter Neary & Joe Tharakan, 2005. "Endogenous mode of competition in general equilibrium," Working Papers 200526, School of Economics, University College Dublin.
    3. J. Peter Neary, 2002. "Globalisation and market structure," Working Papers 200220, School of Economics, University College Dublin.
    4. Cosimo Beverelli & Kornel Mahlstein, 2011. "Outsourcing and Competition Policy," Journal of Industry, Competition and Trade, Springer, vol. 11(2), pages 131-147, June.
    5. Alireza Naghavi & Dermot Leahy, 2006. "Intellectual Property Rights and Entry into a Foreign Market: FDI vs. Joint Ventures," Working Papers 2006.97, Fondazione Eni Enrico Mattei.
    6. Alireza Naghavi & Dermot Leahy, 2008. "Intellectual Property Rights and North-South Joint Ventures," Center for Economic Research (RECent) 017, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    7. Kamei, Keita, 2014. "Pro-competitive effect, division of labor, and firm productivity," Economics Letters, Elsevier, vol. 124(1), pages 132-135.
    8. Dirk Willenbockel, 2005. "The Price Normalisation Problem in General Equilibriun Models with Oligopoly Power: An Attempt at Perspective," GE, Growth, Math methods 0505002, EconWPA.
    9. Leopoldo Yanes, 2008. "R&D, Market Structure and Trade: A General Equilibrium Analysis," Discussion Papers Series 361, School of Economics, University of Queensland, Australia.

    More about this item

    Keywords

    Competition policy; Dixit-Stiglitz preferences; General equilibrium; GOLE (General Oligopolistic Equilibrium); Oligopoly; Competition--Government policy; Equilibrium (Economics); Oligopolies--Econometric models; Antitrust law;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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