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Efficiency and surplus bounds in Cournot competition

  • Simon P. Anderson

    ()

  • Régis Renault

    ()

We derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under Cournot competition. To do so, we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of ?-concavity and ?-convexity. The ?more concave? is demand, the larger the share of producer surplus in overall surplus, the smaller is consumer surplus relative to producer surplus, and the lower the ratio of deadweight loss to producer surplus. Deadweight loss over total potential surplus is at Þrst increasing with demand concavity, then eventually decreasing. The analysis is extended to asymmetric Þrm costs.

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File URL: http://www.virginia.edu/economics/RePEc/vir/virpap/papers/virpap360.pdf
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Paper provided by University of Virginia, Department of Economics in its series Virginia Economics Online Papers with number 360.

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Length: 27 pages
Date of creation: Apr 2001
Date of revision:
Handle: RePEc:vir:virpap:360
Contact details of provider: Web page: http://www.virginia.edu/economics/home.html

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  1. Cowling, Keith & Mueller, Dennis C, 1978. "The Social Costs of Monopoly Power," Economic Journal, Royal Economic Society, vol. 88(352), pages 727-48, December.
  2. Anderson, S.P. & de Palma, A. & Kreider, B., 1999. "Tax incidece in Differentiated product Oligopoly," Papers 99-10, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
  3. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 157-78, June.
  4. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Social Choice: A Mean Voter Theorem," Econometrica, Econometric Society, vol. 59(1), pages 1-23, January.
  5. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  7. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  8. Novshek, William, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 85-98, January.
  9. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  10. Poterba, James M., 1996. "Retail Price Reactions to Changes in State and Local Sales Taxes," National Tax Journal, National Tax Association, vol. 49(2), pages 165-76, June.
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