Welfare in differentiated oligopolies with more than two firms
Schmidt, Robert C.
Excessive differentiation in the quality or location dimension in order to soften price competition is a well-established conclusion concerning duopolistic markets. This has inspired authors to discuss policy measures that may improve welfare in a differentiated market. In the present paper, a general welfare analysis is conducted for a varying number of firms. It is shown that outcomes are almost optimal when three or more competitors are in the market. In light of this, a laissez-faire policy should be adopted. For a range of entry costs, market outcomes entail insufficient entry. Therefore, a subsidy to entry may improve welfare.
Horizontal differentiation Vertical differentiation Quality Over differentiation Entry subsidy
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.