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The Effects of Entry under the Coexistence of Oligopolistic and Monopolistic Competition

Author

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  • Kenji Fujiwara

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper proposes a model of a continuum of industries in which some industries are monopolistically competitive, the others are oligopolistic, and they interact in a labor market. We use this model to examine the effects of an increase in the number of oligopolistic firms. We first show that this raises the equilibrium wage and induces exit of monopolistically competitive firms. Then, we find that the profits of each oligopolistic firm and the whole oligopolistic industry decrease. Finally, we establish that if the elasticity of substitution is the same in all industries, welfare improves as a result of an increase in the oligopolistic firms.

Suggested Citation

  • Kenji Fujiwara, 2018. "The Effects of Entry under the Coexistence of Oligopolistic and Monopolistic Competition," Discussion Paper Series 174, School of Economics, Kwansei Gakuin University, revised Feb 2018.
    • Handle: RePEc:kgu:wpaper:174
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    References listed on IDEAS

    as
    1. Feenstra, Robert C., 2018. "Restoring the product variety and pro-competitive gains from trade with heterogeneous firms and bounded productivity," Journal of International Economics, Elsevier, vol. 110(C), pages 16-27.
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    More about this item

    Keywords

    Monopolistic competition; oligopoly; general equilibrium; entry; welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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