Citation

Discussion Paper Details

Please find the details for DP12367 in an easy to copy and paste format below:

Full Details

Title: On the Dilution of Market Power

Author(s): Sergey Kokovin, Mathieu Parenti, Jacques-Fran�ois Thisse and Philip Ushchev

Publication Date: October 2017

Keyword(s): contestable markets, Dominant firms, monopolistic competition, monopolistically competitive fringe and oligopoly

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: We show that a market involving a handful of large-scale firms and a myriad of small-scale firms may give rise to different types of market structure, ranging from monopoly or oligopoly to monopolistic competition through new types of market structure. In particular, we find conditions under which the free entry and exit of small firms incentivizes big firms to sell their varieties at the monopolistically competitive prices, behaving as if in monopolistic competition. We call this result the dilution of market power. The structure of preferences is the main driver for a specific market structure to emerge as an equilibrium outcome.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12367

Bibliographic Reference

Kokovin, S, Parenti, M, Thisse, J and Ushchev, P. 2017. 'On the Dilution of Market Power'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12367