New answers tagged markets
1
this was answer to the original question before user completely edited it to something else
You are asking several different questions:
Do barriers to entry increase the (collective) market power of incumbent suppliers?
Not generally. For example, in Bertrand price competition firms will have no market power even if there are barriers to entry. Even ...
2
First there are some inaccuracies in your question.
The central bank often goes to buy financial instruments that are riskier than government bonds (such as corporate bonds)- which is called "quantitative easing".
This is simply not true large part of QE program consists of buying government bonds (treasury securities). Private bonds or other ...
3
In narrow sense of the word the article was definitely peer reviewed as it was published in Journal of Legal Analysis. But in this narrow sense it was most likely peer reviewed by jurists not economists.
In a broader sense of the word there are economists who had a look at the claims as well. For example, review of their book by Levine (2020) in Journal of ...
3
Besides the great answers already given, adding my two cents:
A firm ends up being a sole player in the sector when market entry for others is restricted, which may not be guaranteed by IRTS or even continual economies of scale.
First, it is important to realize that, contrary to our first naive intuition, IRTS does not imply economies if scale. See this for ...
3
It can be shown that a firm with increasing returns to scale (IRTS) and no market power makes a negative profit (and may not be observed at all, in the long run). Conclusion: either subsidies, or market power is necessary for a firm with global IRTS to be sustainable.
With usual notations, the claim follows from the first order condition for an (inner) ...
4
Provided that increasing returns to scale apply over the whole production function of the company it is likely that it would become natural monopoly. For example, Mankiw in Principles of Economics (pp 292) in some passages even defines monopolies in relation to their cost function:
When a firm’s average-total-cost curve continually declines, the
firm has ...
Top 50 recent answers are included
