Inefficient Diversification in Multimarket Oligopoly with Diseconomies of Scope

Huw Dixon

No 732, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper considers the incentives of oligopolistic firms to diversify into technologically related markets when there are diseconomies of scope. There is a rent-extraction incentive for firms to adopt flexible technologies, which enable them to enter technologically related markets, thereby increasing competition. This strategic motive leads to inefficiency in production, however, due to diseconomies of scope. This paper shows that the welfare gain from increased competition can be more than offset by the inefficiency in production, which may lead to lower welfare than in the case of pure monopoly.

Keywords: Diseconomies of Scope; Diversification; Oligopoly (search for similar items in EconPapers)
JEL-codes: D24 D43 D61 (search for similar items in EconPapers)
Date: 1992-11
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=732 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:732

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=732

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().