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On the General Equilibrium Effects of Market Power

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URI: https://hdl.handle.net/10016/35529
ISSN: 2340-5031
UXXI: DT/0000002016
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we2208.pdf (822 KB)
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2022-07-22
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Abstract
In an economy in which firms exercise market power in the markets for consumption goods and inputs (labor), we show that a merger to monopoly is Pareto improving when the number of firms is below a threshold. This threshold is larger the larger is the elasticity of labor supply and the smaller is the consumers'preference for goods variety. Consequently, market concentration may have non-monotonic general equilibrium effects on wage mark downs, employment and welfare.
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General Equilibrium, Market Power, Market Efficiency, Mergers
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DES - Working Papers. Statistics and Econometrics. WS