Some thoughts on the Sutton approach Concentration in high-tech markets

摘要

I analyze the relation between market size and number of firms when an endogenous number of firms ehooses the market strategy and (simultaneously or sequentially) an R&D investment. I generalize the linear Cournot model with an endogenous eost-redueing activity and show that, as long as exogenous fixed costs are positive, the market structure is naturally characterized by an inverted-U relation between market size and number of firms, in line with the celebrated hypothesis of Sutton. However, the increase of the market size reduces the prices and expands individual investment and production exactly as in endogenous market structure only with exogenous fixed costs.