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Does entry improve welfare? A general equilibrium approach to competition policy

Author

Listed:
  • Bertrand Crettez

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Marie-Cécile Fagart

Abstract

We consider a simple general equilibrium model with imperfect competition. Firms are price taker in the input market and compete à la Cournot in some or all of the product markets (their technology displays constant returns to scale). We show that an increase in the number of firms does not always improve welfare. We also provide a characterization in terms of mark-up rates of the sectors for which entry is welfare enhancing. Thus, this paper challenges the common idea that mergers with no cost synergy are not desirable for consumers.

Suggested Citation

  • Bertrand Crettez & Marie-Cécile Fagart, 2008. "Does entry improve welfare? A general equilibrium approach to competition policy," Working Papers hal-04140744, HAL.
    • Handle: RePEc:hal:wpaper:hal-04140744
    Note: View the original document on HAL open archive server: https://hal.science/hal-04140744
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