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Welfare Changes in the Cournot Setting with an Empirical Application to the Telecommunications Industry
Author(s) -
Ferreira Pedro
Publication year - 2017
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12134
Subject(s) - cournot competition , wireline , economic surplus , economics , welfare , microeconomics , deadweight loss , bertrand paradox (economics) , bertrand competition , oligopoly , telecommunications , computer science , market economy , wireless
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.