Working Paper: CEPR ID: DP13764
Authors: Konrad O. Stahl; Patrick Legros
Abstract: Increased competition tends to benefit all buyers with increasing product variety and de- creasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, local surplus is better provided by local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and local surplus is better provided by local monopoly.
Keywords: global competition; monopoly; oligopoly; search
JEL Codes: D83; L12; L13; L81
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased external competition (L19) | decrease in local variety (R11) |
| external buyer surplus (D62) | local buyer surplus (D11) |
| external market buyer surplus (low) (D41) | local surplus better provided by local oligopoly (D43) |
| external market buyer surplus (high) (D41) | local surplus moves against external surplus (F29) |
| local surplus better provided by local monopoly (D42) | performance varies with intensity of external competition (L25) |