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Does entry improve welfare? A general equilibrium approach to competition policy

Bertrand Crettez and Marie-Cecile Fagart

No 2008-14, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We consider a simple general equilibrium model with imperfect competition. Firms are price taker in the input market and compete à la Cournot in some or all of the product markets (their technology displays constant returns to scale). We show that an increase in the number of firms does not always improve welfare. We also provide a characterization in terms of mark-up rates of the sectors for which entry is welfare enhancing. Thus, this paper challenges the common idea that mergers with no cost synergy are not desirable for consumers.

Keywords: Cournot competition; competition policy; general equilibrium and imperfect competition; effciency (search for similar items in EconPapers)
JEL-codes: D50 L13 L40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-mic
Date: 2008
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Related works:
Journal Article: Does entry improve welfare? A general equilibrium approach to competition policy (2009) Downloads
Working Paper: Does Entry Improve Welfare ? A General Equilibrium Approach of Competition Policy (2005) Downloads
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