Coexistence of large firms and less efficient small firms under price competition with free entry |
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Authors: | Makoto Yano |
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Affiliation: | Faculty of Economics, Keio University, Tokyo, Japan. Email: |
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Abstract: | This study constructs a game of technology selection and Bertrand-like price competition in a market with free entry. It demonstrates the existence of a Nash equilibrium in which a small number of firms adopting a large-scale technology coexist with, and charge a lower price than, a large number of firms adopting a small-scale technology. In this equilibrium, both available technologies and resources are allocated efficiently. This result provides a new economic rationale for antitrust law in general and, in particular, the US Sherman Act, wchich regards free entry and price competition as of foremost importance for maintaining market quality. |
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Keywords: | price competition free entry antitrust law market quality |
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