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Tight oligopolies: in search of proportionate remedies

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  • Marcel Canoy
  • S. Onderstal

Abstract

Tight oligopolies are oligopolies the market characteristics of which facilitate the realisation of supranormal profits for a substantial period of time. We entangle the link between market structure and the possibility of welfare reducing behaviour by firms. A useful distinction can be made between ‘unilateral effects' (oligopolistic firms realise supra-normal profits without co-ordinating their strategies) and ‘co-ordinated effects' (oligopolistic firms realise supra-normal profits by co-ordinating their strategies).The study develops a ‘diagnostic approach', a tool that helps policy makers find proportionate remedies to tight oligopolies: (1) ‘prevent' a market from becoming a tight oligopoliy; (2) ‘cure' a currently tight oligopoly by changing the market structure; and (3) treat the symptoms of an established tight oligopoly. We apply this diagnostic approach to six cases of (potentially) tight oligopolies.

Suggested Citation

  • Marcel Canoy & S. Onderstal, 2003. "Tight oligopolies: in search of proportionate remedies," CPB Document 29, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:docmnt:29
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    References listed on IDEAS

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    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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