Oligopoly pricing: the role of firm size and number

Iwan Bos and Marco Marini

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines a homogeneous-good Bertrand-Edgeworth oligopoly model to explore the role of firm size and number in pricing. We consider the price impact of merger, breakup, investment, divestment, entry, and exit. A merger leads to higher prices only when it increases the size of the largest seller and industry capacity is neither too big nor too small post-merger. Similarly, breaking-up a firm only leads to lower prices when it concerns the biggest producer and aggregate capacity is within an intermediate range. Investment and entry (weakly) reduce prices, whereas divestment and exit yield (weakly) higher prices. Taken together, these findings suggest that size matters more than number in the determination of oligopoly prices.

Keywords: Bertrand-Edgeworth competition; Edgeworth price cycle; firm size distribution; oligopoly pricing; price dispersion (search for similar items in EconPapers)
JEL-codes: D43 L1 L12 L13 (search for similar items in EconPapers)
Date: 2022-12-15
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-mic and nep-reg
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Published in Games 1.14(2022): pp. 1-15

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Related works:
Journal Article: Oligopoly Pricing: The Role of Firm Size and Number (2022)
Working Paper: Oligopoly Pricing: The Role of Firm Size and Number (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:115800

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