Welfare in differentiated oligopolies with more than two firms

Excessive differentiation in the quality or location dimension in order to soften price competition is a well-established conclusion concerning duopolistic markets. This has inspired authors to discuss policy measures that may improve welfare in a differentiated market. In the present paper, a gener...

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Bibliographic Details
Published inInternational journal of industrial organization Vol. 27; no. 4; pp. 501 - 507
Main Author Schmidt, Robert C.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.07.2009
Elsevier
Elsevier Sequoia S.A
SeriesInternational Journal of Industrial Organization
Subjects
Competition
Duopoly
Entry subsidy
Horizontal differentiation
Horizontal differentiation Vertical differentiation Quality Over differentiation Entry subsidy
Imperfect competition
Market entry
Oligopoly
Over differentiation
Product differentiation
Quality
Studies
Vertical differentiation
Vertical differentiation
Horizontal differentiation
D43
Quality
Over differentiation
L51
Entry subsidy
D61
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Summary:Excessive differentiation in the quality or location dimension in order to soften price competition is a well-established conclusion concerning duopolistic markets. This has inspired authors to discuss policy measures that may improve welfare in a differentiated market. In the present paper, a general welfare analysis is conducted for a varying number of firms. It is shown that outcomes are almost optimal when three or more competitors are in the market. In light of this, a laissez-faire policy should be adopted. For a range of entry costs, market outcomes entail insufficient entry. Therefore, a subsidy to entry may improve welfare.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0167-7187
1873-7986
DOI:10.1016/j.ijindorg.2008.12.001