Comparative Statics of Oligopoly Equilibrium in a Pure Exchange Economy

Abstract

In this paper we consider an oligopoly and we are concerned with the effect of entry in the market of buyers and/or sellers on the price of the good being sold and the pay-offs/utilities of the buyers and sellers. The major results obtained in this paper are the following: 1) Given the number of buyers both individual as well as aggregate offers go up as the number of sellers increases. Further, the price of Y decreases, each buyer is better off and each seller is worse off as the number of sellers increases. 2) Given the number of sellers, the price of Y increases, each buyer is worse off and each seller is better off as the number of buyers increases. 3) As the economy is replicated the equilibrium price decreases. The sequence of equilibrium prices thus obtained converges to the competitive equilibrium price of the original economy. 4) As the economy is replicated the buyers are better off. The sequence of consumption bundles of the buyers converges to the consumption bundle of the buyers at the competitive equilibrium of the original economy. 5) As the economy is replicated the sellers are worse off. The sequence of consumption bundles of the sellers converges to the consumption bundle of the sellers at the competitive equilibrium of the original economy.