Local Search Markets and External Competition
30 Pages Posted: 25 Jun 2019 Last revised: 23 Jul 2019
Date Written: 2019
Increased competition tends to benefit all buyers with increasing product variety and decreasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, local surplus is better provided by local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and local surplus is better provided by local monopoly.
Keywords: global competition, monopoly, oligopoly, search
JEL Classification: D830, L120, L130, L810
Suggested Citation: Suggested Citation