Competition Among the Big and the Small

Ken-Ichi Shimomura and Jacques Thisse

No DP2012-03, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Many industries are made of a few big firms, which are able to manipulate the market outcome, and of a host of small businesses, each of which has a negligible impact on the market. We provide a general equilibrium framework that encapsulates both market structures. Due to the higher toughness of competition, the entry of big firms leads them to sell more through a market expansion effect generated by the shrinking of the monopolistically competitive fringe. Furthermore, social welfare increases with the number of big firms because the pro-competitive effect associated with entry dominates the resulting decrease in product diversity.

Keywords: Oligopoly; Monopolistic competition; Product differentiation; Welfare (search for similar items in EconPapers)
JEL-codes: L13 L40 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-02
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (63)

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Related works:
Journal Article: Competition among the big and the small (2012)
Working Paper: Competition among the big and the small (2012)
Working Paper: Competition among the big and the small (2009)
Working Paper: Competition Among the Big and the Small (2009)
Working Paper: Competition Among the Big and the Small (2009)
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