Monopolistic Competition vs Oligopoly in the "Large Economy": How Much Is Difference?

Evgeny Zhelobodko, A. Sidorov and Jacques Thisse
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A. Sidorov: NRU-HSE, Moscow, Russia

Journal of the New Economic Association, 2013, vol. 19, issue 3, 10-26

Abstract: The paper studies a market of horizontally differentiated good under increasing return to scale and exogenous number of firms. Three concepts of equilibria are compared: Cournot, Bertrand and monopolistic competition. Under fairly general assumptions on consumer's preferences, it is shown that Lerner index is the highest in Cournot case, monopolistic competition provides the lowest one and Bertrand equilibrium takes intermediate position. When the number of firms N increases, both oligopolistic equilibria converge to monopolistic competitive equilibrium with rate 1/ N . Thus the study generalizes the similar results on markets of homogeneous goods.

Keywords: monopolistic competition; oligopoly; differentiated goods; market power; Lerner index (search for similar items in EconPapers)
JEL-codes: D41 D43 F12 L13 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2013:i:19:p:10-26

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