nep-ind New Economics Papers
on Industrial Organization
Issue of 2005‒05‒29
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Oligopolistic Competition as a Common Agency Game By Claude, D’ASPREMONT; Rodolphe, DOS SANTOS FERREIRA
  2. Free entrance and social welfare. Explaining the causes of excessive entry bias. By Francisco Galera; Pedro Gracia-del-Barrio

    Abstract: In applying the common agency framework to the context of an oligopolistic industry, we want to go beyond the classical dichotomy between Cournot and Bertrand competition. We define two games, the oligopolistic game and the corresponding concept of oligopolistic equilibrium, and an associated auxiliary game that can be interpreted as a common agency game and that has the same set of equilibria. The parameterization of the set of (potential) equilibria in terms of competitive thoughness is derived from the first order conditions of the auxiliary game. The enforceability of monopolistic competition, of price and quantity competition, and of collusion is examined in this framework. We then describe the (reduced) set of equilibria one would obtain, first in the non-intrinsic case and then in the case where a global approach would be adopted instead of partial equilibrium approach. Finally, we illustrate the use of the concept of oligopolistic equilibrium and of the corresponding parameterization by referring to the standard case of symmetric quadratic utility.
    Date: 2005–02–17
  2. By: Francisco Galera (School of Economics and Business Administration, University of Navarra); Pedro Gracia-del-Barrio (School of Economics and Business Administration, University of Navarra)
    Abstract: The economic theory has proved that free entry is not always advantageous from a social welfare point of view. Fro instance, a number of inefficiencies can arise from free entry in the presence of fixed set-up costs. Then, an excessive number of firms can usually be settled in homogeneous produc markets within an imperfect competition framework. The economic forces underlying the entry biases are somewhat obscure yet. This paper claims that capacity constraints and diseconomies of scale ought to be driving the discussion of this issue. The characteristics of the cost function, rather than other features, play the major role and should attract the attention of the future research effort. The paper develops an example with which to illustrate the discussion.
    JEL: D24 D43 L13
    Date: 2005–05

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