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When cost improvements harm consumers

Abstract : This paper demonstrates that in a vertical structure, improving cost efficiency might sometimes be detrimental to consumers, by increasing market price. This is in stark contrast to the standard result in oligopoly theory which suggests that the surplus generates by any efficiency gain in production is shared between firms and final consumers, depending on the degree of market power. These results are applied in contexts such as international trade, diffusion of knowledge and techniques and government intervention through income support programs.
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https://hal-enac.archives-ouvertes.fr/hal-01021576
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Submitted on : Thursday, July 17, 2014 - 3:02:30 PM
Last modification on : Saturday, May 30, 2020 - 3:39:48 AM
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Nicolas Gruyer, Philippe Bontems. When cost improvements harm consumers. Review of Industrial Organization, Springer US, 2007, 30 (1), pp 63-79. ⟨10.1007/s11151-007-9126-z⟩. ⟨hal-01021576⟩

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