Consumer Heterogeneity and Inefficiency in Oligopoly Markets

Abstract

Motivated by several recent papers on oligopoly theory, we characterize geometric properties of a class of inequalities involving the product of two integrals of the probability density quantile function and its reciprocal. Through three applications, we illustrate how our characterization can help enrich our understanding of the existing findings and shed some new insight, regarding the extent to which market inefficiency depends on the properties of the distributions of consumer heterogeneity.

Keywords: Probability density quantile, discrete choice models, consumer heterogeneity, log-concavity, free entry, efficiency, competitive bundling, multi-sided markets

JEL Classification: L13, L4