Comparative Statics for Oligopoly: Demand Shift Effects.

Abstract

When demand rises in an imperfectly competitive industry, price, output, profits, consumer surplus, and welfare may individually rise or fall. The possibilities are thus broader than with either a demand shift under competition or a cost shift in either typ e of industry. Systematic relationships are established showing, howe ver, that the pattern of effects cannot be arbitrary. Imperfect compe tition is necessary for profits to fall when demand rises-profits alw ays rise with either perfect competition or perfect collusion. This a gain contrasts with the cost shift case, where imperfect competition is not necessary for perverse profit effects. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.