How Many Firms Should Be Leaders? Beneficial Concentration Revisited

Hiroaki Ino and Toshihiro Matsumura

No 48, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We investigate the relationship between the Herfindahl-Hirschman Index (HHI) and welfare. First, we discuss the model wherein m leaders and N - m followers compete. Daughety (1990) finds that under linear demand and constant marginal cost, the Stackelberg model yields larger welfare and HHI than the Cournot model. Thus, he demonstrates that beneficial concentration occurs. We find that this always occurs under general cost and demand functions when m is sufficiently large, but does not always occur when m is small. Next, we consider the free entry of followers, and find that beneficial concentration always occurs regardless of m. In particular, the more persistent the leadership, the more likely it is to be beneficial.

Keywords: HHI; beneficial concentration; leadership; free entry market (search for similar items in EconPapers)
JEL-codes: L13 L40 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2009-10, Revised 2009-10
New Economics Papers: this item is included in nep-com
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://192.218.163.163/RePEc/pdf/kgdp48.pdf First version, 2009 (application/pdf)

Related works:
Journal Article: HOW MANY FIRMS SHOULD BE LEADERS? BENEFICIAL CONCENTRATION REVISITED (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:48

Access Statistics for this paper

More papers in Discussion Paper Series from School of Economics, Kwansei Gakuin University Contact information at EDIRC.
Bibliographic data for series maintained by Toshihiro Okada ().