nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒07‒21
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. National Oligopolies and Economic Geography By Barbara Annicchiarico; Federica Orioli; Federico Trionfetti
  2. On Product Differentiation and Profits in Unionized Duopolies By Luciano Fanti; Nicola Meccheri

  1. By: Barbara Annicchiarico (Department of Economics - University of Rome “Tor Vergata”); Federica Orioli (University of Rome "Luiss Guido Carli" - University of Rome "Luiss Guido Carli"); Federico Trionfetti (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: We replace monopolistic competition with national oligopolies in a model of "new economic geography". There are many possible bifurcation diagrams but, unlike in monopolistic competition, the symmetric equilibrium is always stable for low trade costs. The antitrust policy, though identical in both countries, affects the geographical distribution of firms. In turn, migration attenuates the effectiveness of the antitrust policy in eliminating collusive behavior. For high trade costs a toughening of the antitrust policy is likely to result in more agglomeration and may reduce world welfare. The antitrust policy is more likely to be welfare improving when market integration progresses.
    Keywords: Spatial Oligopoly, Antitrust Policy, Welfare
    Date: 2011–07–10
  2. By: Luciano Fanti (Department of Economics, University of Pisa, Italy); Nicola Meccheri (Department of Economics, University of Pisa, Italy)
    Abstract: This work aims to investigate if the conventional wisdom, that a decrease in the degree of product differentiation always reduces firms’ profits, remains true in a differentiated duopoly model with decentralized, or firm-specific, monopoly unions. It is shown that, provided that unions are sufficiently wage-oriented, that is, they sufficiently prefer wages to employment, the conventional result can actually be reversed under both Cournot and Bertrand competition, implying that incentives for firms towards less differentiation may arise. Moreover, the range of product differentiation values, for which the “reversal result” applies, is larger when firms compete in quantities than in prices.
    Keywords: unionized duopoly, product differentiation, profits
    JEL: J43 J50 L13
    Date: 2011–07

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