Competition, cost innovation, and x-inefficiency in experimental markets

• Autores: Andrew Smyth
• Localización: Review of Industrial Organization, ISSN-e 1573-7160, Vol. 48, Nº. 3, 2016, págs. 307-331
• Idioma: inglés
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• Resumen

  • This paper examines the relationship between competition, cost innovation, and x-inefficiency in experimental markets. In the lab, oligopolists make closer-to-optimal cost innovation expenditures than do monopolists, which result in lower x-inefficiency in oligopoly than in monopoly. Oligopolies also increase total surplus relative to monopoly, and consumer surplus makes up a larger portion of total surplus in oligopoly than monopoly. The data illustrate how x-inefficiency affects surplus dynamically and suggest price as a mechanism by which competitive pressure increases cost efficiency.