Welfare Changes in the Cournot Setting with an Empirical Application to the Telecommunications Industry |
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Authors: | Pedro Ferreira |
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Affiliation: | Heinz College and Department of Engineering and Public Policy, Carnegie Mellon University, Pittsburgh, Pennsylvania, U.S.A. |
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Abstract: | I characterize the efficiency of the Cournot equilibrium and provide bounds for the loss in consumer surplus, producer surplus and welfare when the number of firms in the market changes. I only assume that demand is decreasing in price and costs increasing in the quantity produced as long as equilibrium exists. I show how price, demand and average cost, before and after the number of firms in the market changes, can be used to compute these bounds. I apply these bounds to the Portuguese wireline market and conclude that welfare increased significantly when the monopolist was split in 2007. |
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