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Competition enhancings measures and scope economies: a welfare appraisal

Pedro Cantos-Sánchez (), Rafael Moner-Colonques and José Sempere-Monerris ()

Investigaciones Economicas, 2003, vol. 27, issue 1, 97-123

Abstract: This paper examines welfare changes before the introduction of more competition in technologically related markets. We develop a simple two-market duopoly with product differentiation where a multi-product firm competes with a different single-product firm in each market. Two competition enhancing measures are considered, divestiture of the multi-product firm and entry of single-product firms in one of the markets. The results obtained indicate that more competition may lead to a welfare reduction. Our analysis points out the relevance of the type and size of economies of scope, the particular way of introducing more competition and the degree of product differentiation.

Keywords: Cost complementarity/substitutability; fixed cost subadditivity; welfare (search for similar items in EconPapers)
JEL-codes: L13 L59 (search for similar items in EconPapers)
Date: 2003
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