Oligopoly, Macroeconomic Performance, and Competition Policy

Arbeitspapier

We develop a macroeconomic framework in which firms are large and have market power with respect to both products and labor. Each firm maximizes a share-weighted average of shareholder utilities, which makes the equilibrium independent of price normalization. In a one-sector economy, if returns to scale are non-increasing, then an increase in “effective” market concentration (which accounts for overlapping ownership) leads to declines in employment, real wages, and the labor share. Moreover, if the goal is to foster employment then (i) controlling common ownership and reducing concentration are complements and (ii) government jobs are a substitute for either policy. Yet when there are multiple sectors, due to an intersectoral pecuniary externality, an increase in common ownership can stimulate the economy when the elasticity of labor supply is high relative to the elasticity of substitution in product markets. We find that neither the monopolistically competitive limit of Dixit and Stiglitz nor the oligopolistic one of Neary (when firms become small relative to the economy) are attained unless there is incomplete portfolio diversification with no intra-industry common ownership.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 7189

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Business Objectives of the Firm ; Monopolization; Horizontal Anticompetitive Practices ; Portfolio Choice; Investment Decisions ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement
• Subject: ownership ; portfolio diversification ; labor share ; market power ; oligopsony ; antitrust policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Azar, José ; Vives, Xavier
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/185387
• Last update: 10.03.2025, 11:44 AM CET