Nothing Special   »   [go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2012-03.html
   My bibliography  Save this paper

Competition Among the Big and the Small

Author

Listed:
  • Ken-Ichi Shimomura

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Jacques-François Thisse

    (CORE, Université catholique de Louvain (Belgium), CREA, Université du Luxembourg (Luxembourg) and CEPR (UK))

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.

Suggested Citation

  • Ken-Ichi Shimomura & Jacques-François Thisse, 2012. "Competition Among the Big and the Small," Discussion Paper Series DP2012-03, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2012-03
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2012-03.pdf
    File Function: First version, 2012
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jaskold Gabszewicz, Jean & Vial, Jean-Philippe, 1972. "Oligopoly "A la cournot" in a general equilibrium analysis," Journal of Economic Theory, Elsevier, vol. 4(3), pages 381-400, June.
    2. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
    3. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919.
    4. R.J. Aumann & S. Hart (ed.), 2002. "Handbook of Game Theory with Economic Applications," Handbook of Game Theory with Economic Applications, Elsevier, edition 1, volume 3, number 3.
    5. Roberts, John & Sonnenschein, Hugo, 1977. "On the Foundations of the Theory of Monopolistic Competition," Econometrica, Econometric Society, vol. 45(1), pages 101-113, January.
    6. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1996. "On the Dixit-Stiglitz Model of Monopolistic Competition," American Economic Review, American Economic Association, vol. 86(3), pages 623-629, June.
    7. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1989. "Unemployment in an Extended Cournot Oligopoly Model," Oxford Economic Papers, Oxford University Press, vol. 41(3), pages 490-505, July.
    8. Brander, James A & Eaton, Jonathan, 1984. "Product Line Rivalry," American Economic Review, American Economic Association, vol. 74(3), pages 323-334, June.
    9. Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 701-729, June.
    10. Bonanno, Giacomo, 1990. "General Equilibrium Theory with Imperfect Competition," Journal of Economic Surveys, Wiley Blackwell, vol. 4(4), pages 297-328.
    11. Victor Ginsburgh & Michiel Keyzer, 2002. "The Structure of Applied General Equilibrium Models," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571579, April.
    12. Wennekers, Sander & van Stel, André & Carree, Martin & Thurik, Roy, 2010. "The Relationship between Entrepreneurship and Economic Development: Is It U-Shaped?," Foundations and Trends(R) in Entrepreneurship, now publishers, vol. 6(3), pages 167-237, July.
    13. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1369-1413.
    14. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    15. Holmes, Thomas J., 1996. "Can consumers benefit from a policy limiting the market share of a dominant firm?," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 365-387, May.
    16. Chen, Zhiqi, 2003. "Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-625, Winter.
    17. Eaton, B Curtis & Schmitt, Nicolas, 1994. "Flexible Manufacturing and Market Structure," American Economic Review, American Economic Association, vol. 84(4), pages 875-888, September.
    18. Gabszewicz, Jean J. & Shitovitz, Benyamin, 1992. "The core in imperfectly competitive economies," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 15, pages 459-483, Elsevier.
    19. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    20. Basker, Emek, 2011. "The Causes and Consequences of Wal-Mart’s Growth," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 110-134.
    21. J. Peter Neary, 2003. "Presidential Address: Globalization and Market Structure," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 245-271, 04/05.
    22. Philippe Askenazy & Katia Weidenfeld, 2007. "Les soldes de la loi Raffarin," Post-Print halshs-00754858, HAL.
    23. Gautam Gowrisankaran & Thomas J. Holmes, 2004. "Mergers and the Evolution of Industry Concentration: Results from the Dominant-Firm Model," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 561-582, Autumn.
    24. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, April.
    25. Yongmin Chen & Michael H. Riordan, 2008. "Price‐increasing competition," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 1042-1058, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jacques-François Thisse & Philip Ushchev, 2018. "Monopolistic competition without apology," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume I, chapter 5, pages 93-136, Edward Elgar Publishing.
    2. Behrens, Kristian & Murata, Yasusada, 2012. "Trade, competition, and efficiency," Journal of International Economics, Elsevier, vol. 87(1), pages 1-17.
    3. Kristian Behrens & Yasusada Murata, 2011. "Trade, Competition, and Efficiency (revised version)," Cahiers de recherche 1118, CIRPEE.
    4. Parenti, Mathieu & Ushchev, Philip & Thisse, Jacques-François & Kokovin, Sergey, 2017. "On the Dilution of Market Power," CEPR Discussion Papers 12367, C.E.P.R. Discussion Papers.
    5. Ottaviano, Gianmarco & Thisse, Jacques-François, 1999. "Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity," CEPR Discussion Papers 2151, C.E.P.R. Discussion Papers.
    6. Parenti, Mathieu & Ushchev, Philip & Thisse, Jacques-François, 2017. "Toward a theory of monopolistic competition," Journal of Economic Theory, Elsevier, vol. 167(C), pages 86-115.
    7. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School of Economics, University College Dublin.
    8. Parenti, Mathieu & Sidorov, Alexander & Thisse, Jacques-François, 2014. "Revisiting Cournot and Bertrand in the presence of income effects," MPRA Paper 69641, University Library of Munich, Germany.
    9. Etro, Federico, 2017. "Research in economics and monopolistic competition," Research in Economics, Elsevier, vol. 71(4), pages 645-649.
    10. Swati Dhingra & John Morrow, 2019. "Monopolistic Competition and Optimum Product Diversity under Firm Heterogeneity," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 196-232.
    11. J. Peter Neary, 2002. "Globalisation and market structure," Working Papers 200220, School of Economics, University College Dublin.
    12. Shon M. Ferguson, 2015. "Endogenous Product Differentiation, Market Size and Prices," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 45-61, February.
    13. Mathieu Parenti & Alexander V. Sidorov & Jacques-François Thisse & Evgeny V. Zhelobodko, 2017. "Cournot, Bertrand or Chamberlin: Toward a reconciliation," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(1), pages 29-45, March.
    14. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    15. Paulo Bastos & Odd Rune Straume, 2012. "Globalization, product differentiation, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 857-878, August.
    16. USHCHEV, Philip & SLOEV, Igor & THISSE, Jacques-François & ,, 2013. "Do we go shopping downtown or in the ‘burbs’? Why not both?," LIDAM Discussion Papers CORE 2013057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    17. J. Peter Neary, 2009. "Putting the “New” into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
    18. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1271-1318.
    19. Bronnenberg, Bart & Dube, Jean-Pierre, 2016. "The Formation of Consumer Brand Preferences," CEPR Discussion Papers 11648, C.E.P.R. Discussion Papers.
    20. J. Peter Neary, 2016. "International Trade in General Oligopolistic Equilibrium," Review of International Economics, Wiley Blackwell, vol. 24(4), pages 669-698, September.

    More about this item

    Keywords

    Oligopoly; Monopolistic competition; Product differentiation; Welfare;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2012-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.