Welfare in differentiated oligopolies with more than two firms
Excessive differentiation in the quality or location dimension in order to soften price competition is a well-established conclusion concerning duopolistic markets. This has inspired authors to discuss policy measures that may improve welfare in a differentiated market. In the present paper, a general welfare analysis is conducted for a varying number of firms. It is shown that outcomes are almost optimal when three or more competitors are in the market. In light of this, a laissez-faire policy should be adopted. For a range of entry costs, market outcomes entail insufficient entry. Therefore, a subsidy to entry may improve welfare.
Year of publication: |
2009
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Authors: | Schmidt, Robert C. |
Published in: |
International Journal of Industrial Organization. - Elsevier, ISSN 0167-7187. - Vol. 27.2009, 4, p. 501-507
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Publisher: |
Elsevier |
Keywords: | Horizontal differentiation Vertical differentiation Quality Over differentiation Entry subsidy |
Saved in:
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