Patrick Legros, Konrad Stahl
ECARES WP2019-13, ULB
Publication year: 2019

Increased competition tends to benefit all buyers with increasing product variety and decreasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, the local surplus is better provided by a local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and the local surplus is better provided by a local monopoly.