 More competitors or more competition? Market concentration and the intensity of competitionFlavio Menezes and John Quiggin Economics Letters, 2012, vol. 117, issue 3, 712-714 Abstract: We present a model of competitive interaction among n symmetric firms producing a homogeneous good that includes both Bertrand and Cournot competition as special cases. In our model the intensity of competition is captured by a single parameter—the perceived slope of competitors’ supply functions. We show that total welfare increases monotonically with the intensity of competition and the number of competitors. We then examine how the intensity of competition affects the gains from changing the number of competitors. When competition is intense, most of the gains from extra competition are captured with the entry of a small number of firms and subsequent gains from entry are small. Conversely, when the intensity of competition is small, a reduction in the number of firms can have a large impact on welfare. Keywords: Competition intensity; Number of competitors; Mergers (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:117:y:2012:i:3:p:712-714 DOI: 10.1016/j.econlet.2011.11.001 Access Statistics for this article Economics Letters is currently edited by Economics Letters Editorial Office More articles in Economics Letters from Elsevier |
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