On the Comparative Statics of the Dominant-Firm Model
This paper examines the effect of a change in demand upon a dominant firm's share of the market. The direction of change in market share is not readily determined in the general form of the model. It depends upon the values of a number of parameters. In the linear and log-linear forms of the model, however, the number of crucial parameters reduces to two. The market share of the dominant firm varies directly (inversely) with demand when the y-intercept of its marginal cost curve is greater (less) than the y-intercept of the supply curve of the fringe in the linear model and, in the log-linear model, when the elasticity of marginal cost with respect to output is less (greater) for the dominant firm than it is for the fringe.
linear model, market share, marginal cost, industrial organization, crucial parameter
Hoftyzer, John, Edward L. Millner, and J. Wilson Mixon. "On the comparative statics of the dominant-firm model." Review of Industrial Organization 4, no. 1 (1989): 119-130.