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Endogenous Market Structures and Innovation

Author

Listed:
  • Federico Etro

    (Department of Economics, University Of Venice, Ca� Foscari)

Abstract

One of the pioneering works on endogenous market structures, by Tandon (1984), has extended the standard Cournot model with linear demand to endogenous entry and sunk R&D costs to show that the endogenous number of firms is independent from the size of the market. I generalize the model in many directions and show that, as long as the exogenous fixed costs are positive, the endogenous market structure is naturally characterized by an inverted-U relation between market size and number of firms, in line with the celebrated hypothesis of Sutton (1991).

Suggested Citation

  • Federico Etro, 2010. "Endogenous Market Structures and Innovation," Working Papers 2010_29, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2010_29
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    Citations

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    Cited by:

    1. Etro, Federico, 2011. "Endogenous market structures and contract theory: Delegation, principal-agent contracts, screening, franchising and tying," European Economic Review, Elsevier, vol. 55(4), pages 463-479, May.
    2. Jacques W. Brook & Vincent Feltkamp & Martin van der Meer, 2012. "Cloud Enabled Business Model Innovation: Gaining Strategic Competitive Advantage as the Market Emerges," Working Papers 2012/49, Maastricht School of Management.
    3. Ma, Mingcao & Weng, Jin & Yu, Larry, 2015. "Market size, scale economies, and tourism market structure: A case of historic water town tourism in China," Tourism Management, Elsevier, vol. 49(C), pages 119-137.
    4. Etro, Federico & Rossi, Lorenza, 2015. "New-Keynesian Phillips curve with Bertrand competition and endogenous entry," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 318-340.

    More about this item

    Keywords

    Oligopoly; Endogenous entry; Sunk costs; RD investment;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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