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DYNAMIC GAINS AND STATIC LOSSES IN OLIGOPOLY: EVIDENCE FROM THE BEER INDUSTRY
Author(s) -
Gisser Mica
Publication year - 1999
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1999.tb01448.x
Subject(s) - oligopoly , economics , monopoly , dynamic efficiency , microeconomics , investment (military) , welfare , causation , herfindahl index , macroeconomics , cournot competition , market economy , politics , political science , law
The paper provides a new perspective on the estimate of the welfare losses due to oligopoly. I argue that the conventional analysis of monopoly/oligopoly welfare losses can be misleading. If causation runs from investment in new technology to increased concentration, dynamic gains from innovation should be taken into account for a fuller analysis of welfare losses. I use beer‐industry data to demonstrate that technological changes Granger‐cause beer prices, and beer prices Granger‐cause the Herfindahl index. I then estimate the dynamic gains to consumers in the beer industry and find these gains to be impressive relative to conventional static losses. ( JEL L10, L13)