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From Walrasian oligopolies to natural monopolyan: An evolutionary model of market structure

Ana Ania (), Carlos Alós Ferrer and Fernando Vega Redondo
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Carlos Alós Ferrer: Universidad de Alicante
Fernando Vega Redondo: Instituto Valenciano de Investigaciones Económicas

Authors registered in the RePEc Author Service: Fernando Vega-Redondo and Carlos Alós-Ferrer ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We study a market for a homogeneous good in which firms adjust theirproduction decisions on the basis of imitation, learning from own experience, and local experimentation.For any fixed set of firms (more than one), long run behavior settles on a symmetric marginal-cost pricingequlibrium. When market entry and exit are allowed, we find a sharp effect of technology onlongrun market structure. Specifically, we show that, under decreasing returns and some fixed cost,the market grows to full capacity at Walrasian equlibrium; on the other hand, if returns areincreasing, the unique long run outcome involves a profit-maximizing monopolist.

Keywords: Imitation; evolution; mutation (search for similar items in EconPapers)
Pages: 25 pages
Date: 1997-12
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Published by Ivie

Downloads: (external link) Fisrt version / Primera version, 1997 (application/pdf)

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