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- Title
PROMINENCE AND MARKET POWER: ASYMMETRIC OLIGOPOLY WITH SEQUENTIAL CONSUMER SEARCH.
- Authors
Hanazono, Makoto; Kudoh, Noritaka
- Abstract
This article presents a new perspective on the nature of market power through the lens of firm prominence. We build a model of oligopolistic price competition with sequential consumer search, showing that a larger firm sets a higher price than its smaller competitors. Consumers are more likely to encounter sellers from a larger firm both immediately and in future interactions, resulting in less‐elastic demand for that firm. Small firms can free‐ride on the prominent firm's market power to raise their prices and earn higher profits. The Herfindahl–Hirschman Index provides a useful guide for welfare evaluation.
- Subjects
SMALL business; PRICE increases; PRICES; CONSUMERS; OLIGOPOLIES
- Publication
International Economic Review, 2024, Vol 65, Issue 3, p1249
- ISSN
0020-6598
- Publication type
Article
- DOI
10.1111/iere.12704