Market Structure, Scale Economies and Industry Performance

CORE Discussion Paper No. 2003/65

29 Pages Posted: 21 Jun 2007

See all articles by Rabah Amir

Rabah Amir

University of Arizona - Department of Economics; University of Arizona

Date Written: September 1, 2003

Abstract

We provide an extensive and general investigation of the effects on industry performance - profits, social welfare and price-cost margins - of exogenously changing the number of firms in Cournot markets. This includes an in-depth exploration of the well-known trade-off between competition and production efficiency. Most conventional beliefs actually require some qualifications to be valid. Under scale economies, welfare is maximized by a finite number of firms. Our results shed light on several policy debates in industrial organization, including the relationship between the Herfindahl index and social welfare, destructive competition and natural monopoly. Our analytical approach combines simplicity with generality

Keywords: Cournot oligopoly, returns to scale, entry, equilibrium comparative statics

JEL Classification: D43, D60, L13, L40

Suggested Citation

Amir, Rabah, Market Structure, Scale Economies and Industry Performance (September 1, 2003). Available at SSRN: https://ssrn.com/abstract=995721 or http://dx.doi.org/10.2139/ssrn.995721

Rabah Amir (Contact Author)

University of Arizona - Department of Economics ( email )

Tucson, AZ 85721
United States

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

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