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From Walrasian Oligopolies to Natural Monopoly: an Evolutionary Model of Market Structure

Alos-Ferrer, Carlos and Ania, Ana B and Vega-Redondo, Fernando (1998) From Walrasian Oligopolies to Natural Monopoly: an Evolutionary Model of Market Structure. Working Paper. CRIEFF Discussion Papers 9805.

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Abstract

We study a market for a homogeneous good in which firms adjust their production decisions on the basis of imitation, learning from own experience, and local experimentation. For any fixed set of firms (more than one), long run behaviour settles on a symmetric marginal-cost pricing equilibrium. When market entry and exit are allowed, we find a sharp effect of technology on long-run market structure. Specifically, we show that, under decreasing returns and some fixed cost, the market grows to "full capacity" at Walrasian equilibrium; on the other hand, if returns are increasing, the unique long run outcome involves a profit-maximising monopolist.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Evolution; mutation; imitation; oligopoly
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 06 Jan 2013 19:50
Last Modified: 06 Jan 2013 19:50
URI: http://repository.essex.ac.uk/id/eprint/4990

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