TY - UNPB
T1 - The effects of entry in thin markets
AU - Dickson, Alex
PY - 2010
Y1 - 2010
N2 - 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.
AB - 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.
KW - markets
KW - business
KW - bilateral oligopoly
KW - entry
KW - comparative statics
UR - http://econpapers.repec.org/paper/strwpaper/1011.htm
M3 - Working paper
BT - The effects of entry in thin markets
ER -