The Geometry of Supply, Demand, and Competitive Market Structure with Economies of Scope

B. Eaton () and S Q Lemche

American Economic Review, 1991, vol. 81, issue 4, 901-11

Abstract: The geometry of a two-good partial-equilibrium model with economies of scope is presented. There are three types of firms: diversified firms that produce both goods and two types of specialized firms. Thus, there are five possible industry market structures: one involving all three types of firms, three involving two types of firms, and one involving only diversified firms. The authors show that the equilibrium market structure is jointly determined by supply (cost) and demand conditions and that any market structure involving more types of firms than goods is an unlikely occurrence. Copyright 1991 by American Economic Association.

Date: 1991
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