An increase in a firm’s marginal cost can raise its profit

Simon Cowan

Economics Letters, 2025, vol. 255, issue C

Abstract: A firm in a Cournot industry can benefit from an increase in its marginal cost while its rivals’ costs are unchanged. This requires the firm’s profit margin to be increasing in its marginal cost and outputs to be strategic complements for the rivals. The margin increases if inverse demand curvature exceeds the number of firms. The main examples have demand functions with constant price elasticities below 1 and a duopoly.

Keywords: Cournot oligopoly (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003660

DOI: 10.1016/j.econlet.2025.112529

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