 Why Are Firms Sometimes Unwilling to Reduce Costs?X. Wang () and Jingang Zhao No 703, Working Papers from Department of Economics, University of Missouri Abstract: This paper establishes three new results for multiproduct oligopolies: 1) it presents the first explicit expression of Nash equilibria for asymmetric multiproduct oligopolies; 2) it shows that reducing a multiproduct firms cost in Bertrand oligopolies will reduce its profits if the cost-reducing unit is sufficiently small; and 3) it demonstrates that a multiproduct firm has no incentive to eliminate a product whose sales are zero. Because a single-product firm whose sales are zero is indifferent between exiting and staying, and its cost reductions always increase its profits, our results are unique to the multiproduct firm, and they suggest that extending oligopoly studies from a single product to multi-products could be as significant as the extension of calculus from a single variable to multi-variables. Keywords: Effect of cost reduction; multiproduct oligopoly; price competition; quantity competition (search for similar items in EconPapers) Published in Journal of Economics 2010 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:0703 Access Statistics for this paper More papers in Working Papers from Department of Economics, University of Missouri Contact information at EDIRC. |
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