Effects of Entry on Profits under Monopolistic Competition

Leonid Hurwicz

Chapter 9 in The Economics of Imperfect Competition and Employment, 1989, pp 305-364 from Palgrave Macmillan

Abstract: Abstract The aim of this chapter is to examine the effects of entry of new firms in a symmetric differentiated products industry, in particular the effect on the profits of firms already in the industry. Purposely, our models are kept close to those of a Chamberlinian industry, but with this exception: because of the implicit indivisibilities, it would be only by accident that profits are zero at free entry equilibrium (as they also are in Joan Robinson’s models). Typically, the entry of an additional firm would (under symmetry assumptions) result in negative profits for everyone, but if an additional firm does not enter profits at equilibrium are positive.

Keywords: Average Cost; Symmetric Solution; Symmetric Equilibrium; Positive Output; Cournot Equilibrium (search for similar items in EconPapers)
Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-08630-6_9

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DOI: 10.1007/978-1-349-08630-6_9

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