Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266673 
Year of Publication: 
2021
Citation: 
[Journal:] Bulletin of Economic Research [ISSN:] 1467-8586 [Volume:] 74 [Issue:] 4 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2021 [Pages:] 927-948
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex ante, that is, prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical setup. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty.
Subjects: 
excessive entry
oligopoly
uncertainty
welfare
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.