Market structure, scale economies and industry performance

Rabah AMIR

No 2003065, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We provide an extensive and general investigation of the effecst 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 (search for similar items in EconPapers)
JEL-codes: D43 D60 L13 L40 (search for similar items in EconPapers)
Date: 2003-09-01
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Related works:
Working Paper: Market Structure, Scale Economies and Industry Performance (2000)
Working Paper: Market Structure, Scale Economies, and Industry Performance (2000)
Working Paper: Market Structure, Scale Economies and Industry Performance
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Persistent link: http://EconPapers.repec.org/RePEc:cor:louvco:2003065

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