TY - JOUR
T1 - Competition, Cost Innovation, and X-inefficiency in Experimental Markets
AU - Smyth, Andrew
N1 - Publisher Copyright:
© 2015, Springer Science+Business Media New York.
PY - 2016/5/1
Y1 - 2016/5/1
N2 - 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.
AB - 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.
KW - Cost innovation
KW - Experimental economics
KW - X-inefficiency
UR - http://www.scopus.com/inward/record.url?scp=84945572151&partnerID=8YFLogxK
UR - https://doi.org/10.1007/s11151-015-9487-7
U2 - 10.1007/s11151-015-9487-7
DO - 10.1007/s11151-015-9487-7
M3 - Article
AN - SCOPUS:84945572151
SN - 0889-938X
VL - 48
SP - 307
EP - 331
JO - Review of Industrial Organization
JF - Review of Industrial Organization
IS - 3
ER -