Economics at your fingertips  

Cost uncertainty in an oligopoly with endogenous entry

Marco de Pinto and Laszlo Goerke

Bulletin of Economic Research, 2022, vol. 74, issue 4, 927-948

Abstract: How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex ante, that is, prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical setup. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)

Related works:
Working Paper: Cost Uncertainty in an Oligopoly with Endogenous Entry (2021) Downloads
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:

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0307-3378

Access Statistics for this article

More articles in Bulletin of Economic Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2023-12-27
Handle: RePEc:bla:buecrs:v:74:y:2022:i:4:p:927-948