The road less travelled : oligopoly and competition policy in general equilibrium

I review previous approaches to modelling oligopoly in general equilibrium, and propose
a new view which in principle overcomes their deficiencies: modelling firms as large in their
own market but small in the economy as a whole. Implementing this approach requires a
tractable specification of preferences. Dixit-Stiglitz preferences (which imply iso-elastic
perceived demand functions) could be used, but "continuum-quadratic" preferences (which
imply linear perceived demand functions) are more convenient. To illustrate their usefulness,
I construct a simple closed-economy model of oligopoly in general equilibrium and derive
some surprising implications for competition policy.