Wednesday, June 24, 2015

Oligopolistic vs. monopolistic competition: do intersectoral effects matter?

d’ASPREMONT, Claude (CORE, Universite Catholique de Louvain); DOS SANTOS FERRERIA, Rodolphe (BETA, Universite de Strasbourg, France, and FCEE, Universidade Cataolica Portuguesa) ask Oligopolistic vs. monopolistic competition: do intersectoral effects matter?

ABSTRACT: Recent extensions of the standard Dixit-Stiglitz (1977) model, that go beyond the CES sub-utility assumption, while maintaining monopolistic competition, have mainly emphasized the role of iintrasectoral substitutability. We argue that introducing oligopolistic competition can be an alternative extension, still tractable, allowing to restore the role of intersectoral substitutability and reinforcing the general equilibrium dimension of the model. For this purpose, we use the concept of oligopolistic equilibrium and derive a comprehensive formula to characterize the set of potential equilibria with varying competitive toughness. For two particular competitive regimes, price competition and quantity competition, we show how, with strategic interactions, procompetitive or anti-competitive effects now depend on the elasticity of intersectoral substitution as compared to the elasticity of intrasectoral substitution.

https://lawprofessors.typepad.com/antitrustprof_blog/2015/06/oligopolistic-vs-monopolistic-competition-do-intersectoral-effects-matter.html

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