An Asymmetric Oligopolist can Improve Welfare by Raising Price

An Asymmetric Oligopolist can Improve Welfare by Raising Price We demonstrate that, in Bertrand/Cournot equilibrium, a firm with a relatively small market share may improve social welfare by raising its price. This could be because the price increase can mitigate an output-structure distortion: if there are two goods which have the same marginal cost, then, under some conditions, the good in higher demand (the efficient good) will have a higher markup rate than the other good (the inefficient good). This suggests that the output structure is distorted in favor of the inefficient good, since the higher markup rate of the efficient good should lead to a considerable increase in demand for the inefficient good. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

An Asymmetric Oligopolist can Improve Welfare by Raising Price

Loading next page...
 
/lp/springer_journal/an-asymmetric-oligopolist-can-improve-welfare-by-raising-price-WHjEQSLbhX
Publisher
Springer US
Copyright
Copyright © 2009 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-009-9219-y
Publisher site
See Article on Publisher Site

Abstract

We demonstrate that, in Bertrand/Cournot equilibrium, a firm with a relatively small market share may improve social welfare by raising its price. This could be because the price increase can mitigate an output-structure distortion: if there are two goods which have the same marginal cost, then, under some conditions, the good in higher demand (the efficient good) will have a higher markup rate than the other good (the inefficient good). This suggests that the output structure is distorted in favor of the inefficient good, since the higher markup rate of the efficient good should lead to a considerable increase in demand for the inefficient good.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 10, 2009

References

  • Product diversity in asymmetric oligopoly: Is the quality of consumer goods too low?
    Anderson, S. P.; Palma, A.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve Freelancer

DeepDyve Pro

Price
FREE
$49/month

$360/year
Save searches from Google Scholar, PubMed
Create lists to organize your research
Export lists, citations
Read DeepDyve articles
Abstract access only
Unlimited access to over
18 million full-text articles
Print
20 pages/month
PDF Discount
20% off