Competition among the big and the small
(2012)
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- Authors
- Abstract
- Many industries are made of a few big firms, which are able to manipulate the market outcome, and of a host of small businesses, each of which has a negligible impact on the market. We provide a general equilibrium framework that encapsulates both market structures. Due to the higher toughness of competition, the entry of big firms leads them to sell more through a market expansion effect generated by the shrinking of the monopolistically competitive fringe. Furthermore, social welfare increases with the number of big firms because the pro-competitive effect associated with entry dominates the resulting decrease in product diversity.
- Affiliations
Kobe University RIEB
Citations
Shimomura, K.-I., & Thisse, J.-F. (2012). Competition among the big and the small (CORE Discussion Paper 2012/9). https://hdl.handle.net/2078.5/208717