Working Paper: CEPR ID: DP3333
Authors: Patrick Legros; Konrad O. Stahl
Abstract: We analyse the impact of increased outside opportunities brought to consumers by access to a global market on local market performance under monopoly versus oligopoly. If consumers have to choose once where to shop we show that under all forms of organizing the local market, increased competition from the global market will crowd out variety in the local one. The effect of increased global competition on prices is much less clear. While it yields a price reduction under monopoly, prices may increase under oligopoly. We check the robustness of these results in various extensions and draw consequences on competition and industrial policies.
Keywords: information; monopoly; oligopoly; product quality
JEL Codes: D83; L13; L14; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased global competition (F69) | decrease in variety of products in local market (F61) |
| increased global competition (F69) | price reductions under monopoly (D42) |
| increased global competition (F69) | price increases under oligopoly (when global competition is weak) (D43) |
| increased global competition (F69) | price decreases under oligopoly (when global competition is strong) (D43) |