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When cost improvements harm consumers

Nicolas Gruyer and Philippe Bontems
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Nicolas Gruyer: LEEA (air transport economics laboratory), ENAC

No 3, Economics Working Papers from LEEA (air transport economics laboratory), ENAC (french national civil aviation school)

Abstract: This paper demonstrates that in a vertical structure, improving cost efficiency might sometimes be detrimental to consumers, by increasing market price. This is in stark contrast to the standard result in oligopoly theory which suggests that the surplus generated by any efficiency gain in production is shared between firms and final consumers, depending on the degree of market power. These results are applied in contexts such as international trade, diffusion of knowledge and techniques, and government intervention through income support programs.

Keywords: oligopsonists; retail; vertical structure; cost pass-through. (search for similar items in EconPapers)
JEL-codes: L11 L12 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2006-03-24
New Economics Papers: this item is included in nep-bec and nep-com
Note: Type of Document - pdf; pages: 21.
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http://gruyern.free.fr/wpaper/BontemsGruyer.pdf (application/pdf)

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Journal Article: When cost improvements harm consumers (2007) Downloads
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