Oligopolistic competition and economic welfare. A general equilibrium analysis of entry regulation and tax-subsidy schemes

Two contributions to the general equilibrium analysis of an oligopolistic economy with free entry are intended. First, we generalize the excess entry theorem to the effect that a marginal decrease in the number of oligopolistic firms from the free entry equilibrium level improves economic welfare. Second, we explore the Pareto-improving tax-subsidy schemes in an oligopolistic economy. Several self-financing and Pareto-improving tax-subsidy schemes will be identified. In contrast with the preceding analysis by Atkinson and Stiglitz, which focused on the 'long-run' incidence of corporate taxation, we analyse the 'short-run' as well as 'long-run' welfare implications of various policies under generalized conditions.