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On the Uniqueness of the Welfare–maximizing Number of Firms Under Cournot Oligopoly

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  • Takao Ohkawa
  • Makoto Okamura

Abstract

Under Cournot oligopoly with a homogeneous product, we present a sufficient condition that guarantees the uniqueness of the welfare–maximizing number of firms to attain the global maximum level of welfare by implementation of a piecemeal policy changing the number of firms gradually. We adopt Selten's (1973) ‘fitting–in function’ method, which relates an individual firm's output to an industry's output. When the number of firms is unique, then introducing a lump–sum profit tax (subsidy) can attain the optimal level of welfare. Indirect entry regulation is superior to direct entry regulation from the standpoint of welfare if each entrant engages in rent–seeking activities.

Suggested Citation

  • Takao Ohkawa & Makoto Okamura, 2003. "On the Uniqueness of the Welfare–maximizing Number of Firms Under Cournot Oligopoly," Bulletin of Economic Research, Wiley Blackwell, vol. 55(2), pages 209-222, April.
    • Handle: RePEc:bla:buecrs:v:55:y:2003:i:2:p:209-222
    DOI: 10.1111/1467-8586.00171
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    References listed on IDEAS

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    Cited by:

    1. Marco de Pinto & Laszlo Goerke & Alberto Palermo, 2024. "Informational rents and the excessive entry theorem: The case of hidden action," Scottish Journal of Political Economy, Scottish Economic Society, vol. 71(2), pages 237-252, May.
    2. Eleni Dalla & Christos Karpetis & Erotokritos Varelas, 2014. "Monetary Policy Implications on Banking Conduct and Bank Clients’ Behavior," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(4), pages 427-440, December.
    3. Laszlo Goerke, 2017. "Tax evasion in a Cournot oligopoly with endogenous entry," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 754-779, September.
    4. Kojun Hamada & Takao Ohkawa & Makoto Okamura, 2024. "The optimal specific or ad valorem tax when the other tax is exogenously imposed in a free‐entry Cournot oligopoly market," Bulletin of Economic Research, Wiley Blackwell, vol. 76(1), pages 251-266, January.
    5. Chi-Chih Lin, 2016. "Can Total Deregulation Be A Better Option Than Partial Deregulation?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-16, September.

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