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The effects of entry in thin markets

Dickson, Alex (2010) The effects of entry in thin markets. Working paper. Strathclyde Economics Working Paper Series. (Unpublished)

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    Abstract

    We consider entry of additional firms into the market for a single commodity in which both sellers and buyers are permitted to interact strategically. We show that the market is quasi-competitive, in that the inclusion of an additional seller lowers the price and increases the volume of trade, as expected. However, whilst buyers benefit from this change under reasonable conditions on preferences, we cannot conclude that sellers are always made worse off in the face of more intense competition, contrary to the conventional wisdom. We characterize the conditions under which entry by new sellers may raise the equilibrium profit of existing sellers, which will depend in an intuitive way on the elasticity of a strategic analog of demand and the market share of existing sellers, and encompass completely standard economic environments.

    Item type: Monograph (Working paper)
    ID code: 27860
    Keywords: markets, business, bilateral oligopoly, entry, comparative statics, Economic Theory
    Subjects: Social Sciences > Economic Theory
    Department: Strathclyde Business School > Economics
    Related URLs:
    Depositing user: Dr Alex Dickson
    Date Deposited: 14 Oct 2010 14:56
    Last modified: 06 Oct 2012 09:03
    URI: http://strathprints.strath.ac.uk/id/eprint/27860

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