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Wiley InterScience | ||||||||
  International Journal of Economic TheoryVolume 1 Issue 3, Pages 167 - 188 Published Online: 29 Sep 2005 © 2009 The International Association for Economic Theory
Abstract | References | Full Text: PDF (Size: 230K) | Related Articles | Citation Tracking  Coexistence of large firms and less efficient small firms under price competition with free entry I am grateful to Fumio Dei and Koji Ishibashi for useful conversations. Copyright 2005 The International Society for Economic Theory. KEYWORDS price competition • free entry • antitrust law • market quality KEYWORDS D40 • D41 • D42 • D43 ABSTRACTThis study constructs a game of technology selection and Bertrand-like price competition in a market with free entry. It demonstrates the existence of a Nash equilibrium in which a small number of firms adopting a large-scale technology coexist with, and charge a lower price than, a large number of firms adopting a small-scale technology. In this equilibrium, both available technologies and resources are allocated efficiently. This result provides a new economic rationale for antitrust law in general and, in particular, the US Sherman Act, wchich regards free entry and price competition as of foremost importance for maintaining market quality. Accepted 6 June 2005 | 
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