Intensity of competition and the number of competitors
نویسندگان
چکیده
We setup a model of competitive interaction among symmetric rms producing a homogeneous good that includes both Bertrand and Cournot competition as special cases. In our model the intensity of competition is captured by a single parameter the perceived slope of competitorssupply functions. We show when the number of rms is xed, total welfare increases monotonically with the degree of competition. We then examine how the intensity of competition a¤ects the gains from changing the number of competitors. For very intense competition, most of the gains from extra competition are captured with the entry of a small number of rms and subsequent gains from entry are small. Conversely, when the intensity of competition is small, a reduction in the number of rms can have a large impact on welfare. We also examine the case when the intensity of competition is a function of the number of rms in the market and provide a su¢ cient condition for mergers to be pro table. Key-words: Competition intensity; number of competitors; mergers. JEL Classi cation: L11, L13, L41.
منابع مشابه
More competitors or more competition? Market concentration and the intensity of competition
We present a model of competitive interaction among n symmetric rms producing a homongeous good that includes both Bertrand and Cournot competition as special cases. In our model the intensity of competition is captured by a single parameter the perceived slope of competitorssupply functions. We show that total welfare increases monotonically with the intensity of competition and the number ...
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