Welfare Changes in the Cournot Setting with an Empirical Application to the Telecommunications Industry

20 Pages Posted: 1 May 2017

See all articles by Pedro Ferreira

Pedro Ferreira

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; Carnegie Mellon University - Department of Engineering and Public Policy

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Date Written: March 2017

Abstract

I characterize the efficiency of the Cournot equilibrium and provide bounds for the loss in consumer surplus, producer surplus and welfare when the number of firms in the market changes. I only assume that demand is decreasing in price and costs increasing in the quantity produced as long as equilibrium exists. I show how price, demand and average cost, before and after the number of firms in the market changes, can be used to compute these bounds. I apply these bounds to the Portuguese wireline market and conclude that welfare increased significantly when the monopolist was split in 2007.

Suggested Citation

Ferreira, Pedro, Welfare Changes in the Cournot Setting with an Empirical Application to the Telecommunications Industry (March 2017). The Journal of Industrial Economics, Vol. 65, Issue 1, pp. 194-213, 2017, Available at SSRN: https://ssrn.com/abstract=2960379 or http://dx.doi.org/10.1111/joie.12134

Pedro Ferreira (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

Carnegie Mellon University - Department of Engineering and Public Policy ( email )

Baker Hall 129
5000 Forbes Ave
Pittsburgh, PA 15213
United States

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