Competition, Cost Innovation, and X-inefficiency in Experimental Markets

Authors

Andrew Smyth, Marquette UniversityFollow

Document Type

Article

Language

eng

Publication Date

5-2016

Publisher

Springer

Source Publication

Review of Industrial Organization

Source ISSN

0889-938X

Abstract

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.

Comments

Accepted version. Review of Industrial Organization, Vol. 48, No. 3 (May 2016) : 307-331. DOI. © 2016 Springer. Used with permission.

Andrew Smyth was affiliated with Chapman University at the time of publication.

Recommended Citation

Smyth, Andrew, "Competition, Cost Innovation, and X-inefficiency in Experimental Markets" (2016). Economics Faculty Research and Publications. 604.
https://epublications.marquette.edu/econ_fac/604