On welfare losses due to imperfect competition

Robert Ritz

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Corporate managers and executive compensation in many industries place significant emphasis on measures of firm size, such as sales revenue or market share. Such objectives have an important - yet thus far unquantifed - impact on market performance. With n symmetric firms, equilibrium welfare losses are of order 1/n4, and thus vanish extremely quickly. Welfare losses are less than 5% for many empirically relevant market structures, despite significant firm asymmetry and industry concentration. They can be estimated using only basic information on market shares. These results also apply to oligopsonistic competition (e.g., for retail bank deposits) and strategic forward trading (e.g., in restructured electricity markets).

Keywords: Delegation; forward trading; managerial incentives; market structure; welfare losses. (search for similar items in EconPapers)
JEL-codes: D43 D61 L13 L22 L41 (search for similar items in EconPapers)
Date: 2012-07-23
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econ.cam.ac.uk/sites/default/files/pub ... pe-pdfs/cwpe1234.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: On Welfare Losses Due to Imperfect Competition (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1234

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().