More Competitors or more Competition? Market Concentration and the Intensity of Competition

Flavio Menezes and John Quiggin

No 151195, Risk and Sustainable Management Group Working Papers from University of Queensland, School of Economics

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: Production Economics; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Pages: 10
Date: 2011-08-29
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: More competitors or more competition? Market concentration and the intensity of competition (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uqsers:151195

DOI: 10.22004/ag.econ.151195

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