Unequal Treatment of Identical Agents in Cournot Equilibrium

Greg Shaffer and Stephen Salant

American Economic Review, 1999, vol. 89, issue 3, 585-604

Abstract: Oligopoly models where prior actions by firms affect subsequent marginal costs have been useful in illuminating policy debates in areas such as antitrust regulation, environmental protection, and international competition. The authors discuss properties of such models when a Cournot equilibrium occurs at the second stage. Aggregate production costs strictly decline with no change in gross revenue or gross consumer surplus if the prior actions strictly increase the variance of marginal costs without changing the marginal-cost sum. Therefore, unless the cost of inducing second-stage asymmetry more than offsets this reduction in production costs, the private and social optima are asymmetric.

JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 1999
Note: DOI: 10.1257/aer.89.3.585
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Citations: View citations in EconPapers (108)

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