On the General Equilibrium Effects of Market Power

Diego Moreno and Emmanuel Petrakis

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: In an economy in which firms exercise market power in the markets for consumption goods and inputs (labor), we show that a merger to monopoly is Pareto improving when the number of firms is below a threshold. This threshold is larger the larger is the elasticity of labor supply and the smaller is the consumers'preference for goods variety. Consequently, market concentration may have non-monotonic general equilibrium effects on wage mark downs, employment and welfare.

Keywords: General; Equilibrium; Market; Power; Market; Efficiency; Mergers (search for similar items in EconPapers)
JEL-codes: D4 D5 D6 L1 L4 (search for similar items in EconPapers)
Date: 2022-07-22
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:35529

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