Quantitative Techniques for Competition and Antitrust Analysis by Peter Davis and Eliana Garcés_8

Tham khảo tài liệu 'quantitative techniques for competition and antitrust analysis by peter davis and eliana garcés_8', khoa học xã hội, kinh tế chính trị phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 268 5. The Relationship between Market Structure and Price Figure . The concave relationship between number of firms and market size from a Cournot model. And in a symmetric equilibrium we can describe equilibriumprices andquantities respectively as a Pi b XNq _S a-bc Pd znaOi tv t As in the previous section we rubsfituie theoptimal quantity back into the profit equation Fii p q eq F z t i i i a N i S a be i S a be I - I - I c 11 - I F b bS N 1 J N 1 J Ta-bc s NỴĩjbK For the firm to break even we need at least IJi 0. If we solve for the corresponding equilibrium number of firms we obtain N -M J-t The number of firms is therefore concave in market size s. The Cournot equilibrium derived above is somewhat special ID that to algebra simple we assumed conttantmanginaldosis. Conntmt mar inal coms are the result of constant returns to scale and as we noted previously such a technology effectively imposes no constraint on tPeacalc of the flam. On atteanatiae appinnnOou would be to introduce convex costn . me noulp aaseme t aia ieaoteaeciuaUy decreasing returns to scale set ia. Initat aasn whi ewewi l s ilobiain nuscme result of concavity for smaller mnrketsines findmci dsmaaCet stzrinnreasen . Entry Exit and Pricing Power 269 the relationship becomes approximately linear. Such a feature emphasizes that in the l mt. as market sire gets btg theCournetmedelbeeomes appreattrntely eompetittee and close to the case described for the price-taking firms with decreasing returns. With a large number of firms theeffect offiiediseconomiesofscalesets inandthe size of an individual firm is then mainly CafeominodOy technologicfiOantors siolo the number of active firms is determined bo the size ofthenmrket Entry and Market Power The previous sections explainedihe bacin elomenis of thnentrygameand deaeoibed particularly how market size demand technology and the nature of competitive interaction will determine expected profitabilityandthis in turn will .

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