Computing welfare losses from data under imperfect competition with heterogeneous goods

Galina Zudenkova ()
Authors registered in the RePEc Author Service: Luis C. Corchon

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

Abstract: We study the percentage of welfare losses (PWL) yielded by imperfect competition under product differentiation. When demand is linear, if prices, outputs, costs and the number of firms can be observed, PWL is arbitrary in both Cournot and Bertrand equilibria. If in addition, the elasticity of demand (resp. cross elasticity of demand) is known, we can calculate PWL in Cournot (resp. Bertrand) equilibrium. When demand is isoelastic and there are many firms, PWL can be computed from prices, outputs, costs and the number of .rms. In all these cases we find that price-marginal cost margins and demand elasticities may influence PWL in a counterintuitive way. We also provide conditions under which PWL increases or decreases with concentration.

Keywords: Product; differentiation; Cournot; equilibrium; Bertrand; equilibrium; Welfare; losses (search for similar items in EconPapers)
JEL-codes: D61 L11 L13 L50 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Computing welfare losses from data under imperfect competition with heterogeneous goods (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we082616

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