Does entry improve welfare? A general equilibrium approach to competition policy

Bertrand Crettez () and Marie-Cécile Fagart
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Bertrand Crettez: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: We consider a simple general equilibrium model with imperfect competition. Firms are price taker in the input market and compete à la Cournot in some or all of the product markets (their technology displays constant returns to scale). We show that an increase in the number of firms does not always improve welfare. We also provide a characterization in terms of mark-up rates of the sectors for which entry is welfare enhancing. Thus, this paper challenges the common idea that mergers with no cost synergy are not desirable for consumers.

Keywords: Cournot competition; competition policy; general equilibrium and imperfect competition; effciency (search for similar items in EconPapers)
Date: 2008
Note: View the original document on HAL open archive server: https://hal.science/hal-04140744
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