Oligopoly Pricing: The Role of Firm Size and Number

I. Bos, M.A. Marini*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper examines a homogeneous-good Bertrand-Edgeworth oligopoly model to explore the role of firm size and number in pricing. We consider the price impact of merger, break up, investment, divestment, entry and exit. A merger leads to higher prices only when it increases the size of the largest seller and industry capacity is neither too big nor too small post-merger. Similarly, breaking up a firm only leads to lower prices when it concerns the biggest producer and aggregate capacity is within an intermediate range. Investment and entry (weakly) reduce prices, whereas divestment and exit yield (weakly) higher prices. Taken together, these findings suggest that size matters more than number in the determination of oligopoly prices.
Original languageEnglish
Article number3
Number of pages16
JournalGames
Volume14
Issue number1
DOIs
Publication statusPublished - 1 Feb 2023

JEL classifications

  • d43 - Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
  • l11 - "Production, Pricing, and Market Structure; Size Distribution of Firms"
  • l13 - Oligopoly and Other Imperfect Markets

Keywords

  • Bertrand-Edgeworth competition
  • Edgeworth price cycle
  • firm size distribution
  • oligopoly pricing
  • price dispersion
  • COMPETITION
  • CYCLES
  • CAPACITY

Cite this