Market structure, scale economies, and industry performance

Arbeitspapier

We provide an extensive and general investigation of the effects on industry performance (profits and social welfare) of exogenously changing the number of firms in a Cournot framework. This amounts to an in-depth exploration of the well-known trade-off between competition and production efficiency. We establish that under scale economies, welfare is maximized by a finite number of firms. Our results shed light on several theoretical issues and policy debates in industrial organization, including the relationship between the Herfindahl index and social welfare, free versus socially optimal entry, concentration and profitability, destructive competition and natural monopoly. Our analytical approach combines simplicity with generality.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. FS IV 00-08

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Welfare Economics: General ; Oligopoly and Other Imperfect Markets ; Antitrust Issues and Policies: General
• Subject: Cournot oligopoly ; returns to scale ; entry ; equilibrium comparative statics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Amir, Rabah
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/51013
• Last update: 10.03.2025, 11:44 AM CET