Local Search Markets and External Competition

30 Pages Posted: 25 Jun 2019 Last revised: 23 Jul 2019

See all articles by Patrick Legros

Patrick Legros

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES); Northeastern University, department of economics; Centre for Economic Policy Research (CEPR)

Konrad O. Stahl

University of Mannheim - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

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

Legros, Patrick and Stahl, Konrad O., Local Search Markets and External Competition (2019). CESifo Working Paper No. 7683. Available at SSRN: https://ssrn.com/abstract=3409129

Patrick Legros (Contact Author)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
+32 2 650 4219/3 (Phone)
+32 2 650 4475 (Fax)

Northeastern University, department of economics ( email )

301 Lake Hall
Boston, MA 02115
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Konrad O. Stahl

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181 1875 (Phone)
+49 621 181 1874 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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