Cost uncertainty in an oligopoly with endogenous entry

Arbeitspapier

How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex-ante, i.e. prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical set-up. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IAAEU Discussion Paper Series in Economics ; No. 05/2021

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Oligopoly and Other Imperfect Markets
• Thema: Oligopoly ; Excessive Entry ; Uncertainty ; Welfare

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): De Pinto, Marco ; Goerke, Laszlo
• Ereignis: Veröffentlichung
• (wer): University of Trier, Institute for Labour Law and Industrial Relations in the European Union (IAAEU)
• (wo): Trier
• (wann): 2021

Weitere Informationen

• Handle: http://hdl.handle.net/10419/242847
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ